Correlation Between Realty Income and Medical Properties

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

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

Diversification Opportunities for Realty Income and Medical Properties

0.52

Correlation Coefficient

Realty Income  Medical Properties

Very weak diversification

The 3 months correlation between Realty and Medical is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income 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 Realty Income 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 Realty Income 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 Realty Income i.e., Realty Income and Medical Properties go up and down completely randomly.

Pair Corralation between Realty Income and Medical Properties

Taking into account the 90-day investment horizon Realty Income is expected to generate 0.34 times more return on investment than Medical Properties. However, Realty Income is 2.97 times less risky than Medical Properties. It trades about -0.13 of its potential returns per unit of risk. Medical Properties Trust is currently generating about -0.1 per unit of risk. If you would invest  6,022  in Realty Income on August 31, 2024 and sell it today you would lose (190.00) from holding Realty Income or give up 3.16% of portfolio value over 90 days.

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

Realty Income  vs.  Medical Properties Trust

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Realty Income is not utilizing all of its potentials. The newest stock price disarray, 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. In spite of fairly stable basic indicators, Medical Properties is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Realty Income and Medical Properties

The main advantage of trading using opposite Realty Income and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income 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 Realty Income 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.