Correlation Between Power REIT and Medical Properties

Can any of the company-specific risk be diversified away by investing in both Power REIT 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 Power REIT and Medical Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power REIT and Medical Properties Trust, you can compare the effects of market volatilities on Power REIT 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 Power REIT with a short position of Medical Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power REIT and Medical Properties.

Diversification Opportunities for Power REIT and Medical Properties

-0.33

Correlation Coefficient

Power REIT  Medical Properties

Very good diversification

The 3 months correlation between Power and Medical is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT 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 Power REIT 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 Power REIT 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 Power REIT i.e., Power REIT and Medical Properties go up and down completely randomly.

Pair Corralation between Power REIT and Medical Properties

Allowing for the 90-day total investment horizon Power REIT is expected to generate 4.3 times more return on investment than Medical Properties. However, Power REIT is 4.3 times more volatile than Medical Properties Trust. It trades about 0.08 of its potential returns per unit of risk. Medical Properties Trust is currently generating about 0.01 per unit of risk. If you would invest  98.00  in Power REIT on September 30, 2024 and sell it today you would earn a total of  35.00  from holding Power REIT or generate 35.71% return on investment over 90 days.

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

Power REIT  vs.  Medical Properties Trust

Power REIT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT showed solid returns over the last few months and may actually be approaching a breakup point.

Medical Properties Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Properties Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Power REIT and Medical Properties

The main advantage of trading using opposite Power REIT and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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 Power REIT 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.