Correlation Between Medical Properties and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Medical Properties and Applied Materials 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 Medical Properties and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medical Properties Trust and Applied Materials, you can compare the effects of market volatilities on Medical Properties and Applied Materials 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 Medical Properties with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Properties and Applied Materials.
Diversification Opportunities for Medical Properties and Applied Materials
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medical and Applied is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Medical Properties 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 Medical Properties Trust are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Medical Properties i.e., Medical Properties and Applied Materials go up and down completely randomly.
Pair Corralation between Medical Properties and Applied Materials
Assuming the 90 days trading horizon Medical Properties is expected to generate 23.1 times less return on investment than Applied Materials. In addition to that, Medical Properties is 1.86 times more volatile than Applied Materials. It trades about 0.0 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.06 per unit of volatility. If you would invest 11,516 in Applied Materials on October 29, 2024 and sell it today you would earn a total of 7,496 from holding Applied Materials or generate 65.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.34% |
| Values | Daily Returns |
Medical Properties Trust vs. Applied Materials
Performance |
| Timeline |
| Medical Properties Trust |
| Applied Materials |
Medical Properties and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medical Properties and Applied Materials
The main advantage of trading using opposite Medical Properties and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Properties position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Medical Properties vs. Grand Vision Media | Medical Properties vs. Verizon Communications | Medical Properties vs. LBG Media PLC | Medical Properties vs. Applied Materials |
| Applied Materials vs. Berkshire Hathaway | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Chocoladefabriken Lindt Spruengli |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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