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

0.5

Correlation Coefficient

STAG Industrial  Medical Properties

Very weak diversification

The 3 months correlation between STAG and Medical is 0.5. 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

Given the investment horizon of 90 days STAG Industrial is expected to generate 0.36 times more return on investment than Medical Properties. However, STAG Industrial is 2.79 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 -0.1 per unit of risk. If you would invest  3,768  in STAG Industrial on August 31, 2024 and sell it today you would lose (34.00) from holding STAG Industrial or give up 0.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.