Correlation Between United Natural and Medical Properties

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

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

Diversification Opportunities for United Natural and Medical Properties

-0.33

Correlation Coefficient

United Natural  Medical Properties

Very good diversification

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

Pair Corralation between United Natural and Medical Properties

Assuming the 90 days trading horizon United Natural Foods, is expected to under-perform the Medical Properties. But the stock apears to be less risky and, when comparing its historical volatility, United Natural Foods, is 1.5 times less risky than Medical Properties. The stock trades about -0.05 of its potential returns per unit of risk. The Medical Properties Trust, is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,143  in Medical Properties Trust, on December 24, 2024 and sell it today you would earn a total of  567.00  from holding Medical Properties Trust, or generate 49.61% return on investment over 90 days.

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

United Natural Foods,  vs.  Medical Properties Trust,

United Natural Foods,

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Natural Foods, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. Despite somewhat uncertain basic indicators, Medical Properties sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Natural and Medical Properties

The main advantage of trading using opposite United Natural and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural 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 United Natural Foods, 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .