Correlation Between PPHE Hotel and Medical Properties

Can any of the company-specific risk be diversified away by investing in both PPHE Hotel and Medical Properties at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PPHE Hotel and Medical Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PPHE Hotel Group and Medical Properties Trust, you can compare the effects of market volatilities on PPHE Hotel and Medical Properties and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PPHE Hotel with a short position of Medical Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPHE Hotel and Medical Properties.

Diversification Opportunities for PPHE Hotel and Medical Properties

-0.07

Correlation Coefficient

PPHE Hotel  Medical Properties

Good diversification

The 3 months correlation between PPHE and Medical is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PPHE Hotel Group and Medical Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Properties Trust and PPHE Hotel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PPHE Hotel Group are associated (or correlated) with Medical Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Properties Trust has no effect on the direction of PPHE Hotel i.e., PPHE Hotel and Medical Properties go up and down completely randomly.

Pair Corralation between PPHE Hotel and Medical Properties

Assuming the 90 days trading horizon PPHE Hotel is expected to generate 37.17 times less return on investment than Medical Properties. But when comparing it to its historical volatility, PPHE Hotel Group is 2.62 times less risky than Medical Properties. It trades about 0.02 of its potential returns per unit of risk. Medical Properties Trust is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  468.00  in Medical Properties Trust on December 2, 2024 and sell it today you would earn a total of  103.00  from holding Medical Properties Trust or generate 22.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PPHE Hotel Group  vs.  Medical Properties Trust

PPHE Hotel Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE Hotel Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, PPHE Hotel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Medical Properties Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Medical Properties unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PPHE Hotel and Medical Properties

The main advantage of trading using opposite PPHE Hotel and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPHE Hotel position performs unexpectedly, Medical Properties can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Medical Properties will offset losses from the drop in Medical Properties' long position.

The idea behind PPHE Hotel Group and Medical Properties Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.