Correlation Between STAG Industrial, and Medical Properties

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

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

Diversification Opportunities for STAG Industrial, and Medical Properties

0.26

Correlation Coefficient

STAG Industrial,  Medical Properties

Modest diversification

The 3 months correlation between STAG and Medical is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding STAG Industrial, 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 STAG Industrial, 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 STAG Industrial, 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 STAG Industrial, i.e., STAG Industrial, and Medical Properties go up and down completely randomly.

Pair Corralation between STAG Industrial, and Medical Properties

Assuming the 90 days trading horizon STAG Industrial, is expected to generate 0.35 times more return on investment than Medical Properties. However, STAG Industrial, is 2.9 times less risky than Medical Properties. It trades about 0.03 of its potential returns per unit of risk. Medical Properties Trust, is currently generating about 0.0 per unit of risk. If you would invest  3,440  in STAG Industrial, on October 23, 2024 and sell it today you would earn a total of  705.00  from holding STAG Industrial, or generate 20.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

STAG Industrial,  vs.  Medical Properties Trust,

STAG Industrial,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STAG Industrial, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, STAG Industrial, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. Despite somewhat strong basic indicators, Medical Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with STAG Industrial, and Medical Properties

The main advantage of trading using opposite STAG Industrial, and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STAG Industrial, 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 STAG Industrial, 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.