Correlation Between Federal Realty and Polar Capital

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

Diversification Opportunities for Federal Realty and Polar Capital

0.28

Correlation Coefficient

Federal Realty  Polar Capital

Modest diversification

The 3 months correlation between Federal and Polar is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Federal Realty i.e., Federal Realty and Polar Capital go up and down completely randomly.

Pair Corralation between Federal Realty and Polar Capital

Assuming the 90 days trading horizon Federal Realty is expected to generate 7.82 times less return on investment than Polar Capital. But when comparing it to its historical volatility, Federal Realty Investment is 1.45 times less risky than Polar Capital. It trades about 0.04 of its potential returns per unit of risk. Polar Capital Technology is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  31,360  in Polar Capital Technology on September 17, 2024 and sell it today you would earn a total of  3,390  from holding Polar Capital Technology or generate 10.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Federal Realty Investment  vs.  Polar Capital Technology

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.

Polar Capital Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Polar Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Realty and Polar Capital

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

The idea behind Federal Realty Investment and Polar Capital Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.