Correlation Between American Homes and Medical Properties
Can any of the company-specific risk be diversified away by investing in both American Homes 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 American Homes and Medical Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and Medical Properties Trust, you can compare the effects of market volatilities on American Homes 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 American Homes with a short position of Medical Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Medical Properties.
Diversification Opportunities for American Homes and Medical Properties
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Medical is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 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 American Homes 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 American Homes 4 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 American Homes i.e., American Homes and Medical Properties go up and down completely randomly.
Pair Corralation between American Homes and Medical Properties
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.41 times more return on investment than Medical Properties. However, American Homes 4 is 2.46 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 -0.2 per unit of risk. If you would invest 3,793 in American Homes 4 on September 14, 2024 and sell it today you would lose (22.00) from holding American Homes 4 or give up 0.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Homes 4 vs. Medical Properties Trust
Performance |
| Timeline |
| American Homes 4 |
| Medical Properties Trust |
American Homes and Medical Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Medical Properties
The main advantage of trading using opposite American Homes and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes 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.| American Homes vs. European Metals Holdings | American Homes vs. Omega Healthcare Investors | American Homes vs. Empire Metals Limited | American Homes vs. Induction Healthcare Group |
| Medical Properties vs. Neometals | Medical Properties vs. Metals Exploration Plc | Medical Properties vs. Sunny Optical Technology | Medical Properties vs. Auction Technology Group |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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