Correlation Between Target Healthcare and Medical Properties

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

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

Diversification Opportunities for Target Healthcare and Medical Properties

0.62

Correlation Coefficient

Target Healthcare  Medical Properties

Poor diversification

The 3 months correlation between Target and Medical is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare 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 Target Healthcare 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 Target Healthcare 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 Target Healthcare i.e., Target Healthcare and Medical Properties go up and down completely randomly.

Pair Corralation between Target Healthcare and Medical Properties

Assuming the 90 days trading horizon Target Healthcare REIT is expected to generate 0.3 times more return on investment than Medical Properties. However, Target Healthcare REIT is 3.31 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 -0.03 per unit of risk. If you would invest  8,293  in Target Healthcare REIT on September 5, 2024 and sell it today you would earn a total of  167.00  from holding Target Healthcare REIT or generate 2.01% return on investment over 90 days.

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

Target Healthcare REIT  vs.  Medical Properties Trust

Target Healthcare REIT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target Healthcare REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Target Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Target Healthcare and Medical Properties

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

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..