Correlation Between Federal Realty and Octopus Aim

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

By analyzing existing cross correlation between Federal Realty Investment and Octopus Aim Vct, you can compare the effects of market volatilities on Federal Realty and Octopus Aim 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 Federal Realty with a short position of Octopus Aim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Realty and Octopus Aim.

Diversification Opportunities for Federal Realty and Octopus Aim

0.05

Correlation Coefficient

Federal Realty  Octopus Aim

Significant diversification

The 3 months correlation between Federal and Octopus is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and Octopus Aim Vct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Octopus Aim Vct and Federal Realty 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 Federal Realty Investment are associated (or correlated) with Octopus Aim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Octopus Aim Vct has no effect on the direction of Federal Realty i.e., Federal Realty and Octopus Aim go up and down completely randomly.

Pair Corralation between Federal Realty and Octopus Aim

Assuming the 90 days trading horizon Federal Realty Investment is expected to generate 1.72 times more return on investment than Octopus Aim. However, Federal Realty is 1.72 times more volatile than Octopus Aim Vct. It trades about -0.04 of its potential returns per unit of risk. Octopus Aim Vct is currently generating about -0.12 per unit of risk. If you would invest  11,580  in Federal Realty Investment on September 12, 2024 and sell it today you would lose (304.00) from holding Federal Realty Investment or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Federal Realty Investment  vs.  Octopus Aim Vct

Federal Realty Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Octopus Aim Vct

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Octopus Aim Vct has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Octopus Aim is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Federal Realty and Octopus Aim

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

The idea behind Federal Realty Investment and Octopus Aim Vct 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.