Correlation Between GPT and W P

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

By analyzing existing cross correlation between GPT Group and W P Carey, you can compare the effects of market volatilities on GPT and W P 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 GPT with a short position of W P. Check out your portfolio center. Please also check ongoing floating volatility patterns of GPT and W P.

Diversification Opportunities for GPT and W P

0.25

Correlation Coefficient

GPT  W P

Modest diversification

The 3 months correlation between GPT and WPY is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding GPT Group and W P Carey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W P Carey and GPT 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 GPT Group are associated (or correlated) with W P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W P Carey has no effect on the direction of GPT i.e., GPT and W P go up and down completely randomly.

Pair Corralation between GPT and W P

Assuming the 90 days horizon GPT Group is expected to under-perform the W P. In addition to that, GPT is 3.38 times more volatile than W P Carey. It trades about -0.02 of its total potential returns per unit of risk. W P Carey is currently generating about 0.13 per unit of volatility. If you would invest  5,149  in W P Carey on December 24, 2024 and sell it today you would earn a total of  521.00  from holding W P Carey or generate 10.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

GPT Group  vs.  W P Carey

GPT Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days GPT Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GPT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

W P Carey

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in W P Carey are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, W P may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GPT and W P

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

The idea behind GPT Group and W P Carey 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.