Correlation Between Medical Properties and Verizon Communications

Can any of the company-specific risk be diversified away by investing in both Medical Properties and Verizon Communications 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 Verizon Communications 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 Verizon Communications, you can compare the effects of market volatilities on Medical Properties and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Properties and Verizon Communications.

Diversification Opportunities for Medical Properties and Verizon Communications

0.76

Correlation Coefficient

Medical Properties  Verizon Communications

Poor diversification

The 3 months correlation between Medical and Verizon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Medical Properties i.e., Medical Properties and Verizon Communications go up and down completely randomly.

Pair Corralation between Medical Properties and Verizon Communications

Assuming the 90 days trading horizon Medical Properties Trust is expected to under-perform the Verizon Communications. In addition to that, Medical Properties is 3.48 times more volatile than Verizon Communications. It trades about -0.01 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.01 per unit of volatility. If you would invest  3,902  in Verizon Communications on August 14, 2024 and sell it today you would earn a total of  163.00  from holding Verizon Communications or generate 4.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Medical Properties Trust  vs.  Verizon Communications

Medical Properties Trust

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Medical Properties is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Verizon Communications is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Medical Properties and Verizon Communications

The main advantage of trading using opposite Medical Properties and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Properties position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.

The idea behind Medical Properties Trust and Verizon Communications 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..