Correlation Between Agree Realty and Regency Centers

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

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

Diversification Opportunities for Agree Realty and Regency Centers

0.21

Correlation Coefficient

Agree Realty  Regency Centers

Modest diversification

The 3 months correlation between Agree and Regency is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Agree Realty and Regency Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regency Centers and Agree 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 Agree Realty are associated (or correlated) with Regency Centers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regency Centers has no effect on the direction of Agree Realty i.e., Agree Realty and Regency Centers go up and down completely randomly.

Pair Corralation between Agree Realty and Regency Centers

Considering the 90-day investment horizon Agree Realty is expected to under-perform the Regency Centers. But the stock apears to be less risky and, when comparing its historical volatility, Agree Realty is 1.01 times less risky than Regency Centers. The stock trades about -0.1 of its potential returns per unit of risk. The Regency Centers is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,356  in Regency Centers on November 19, 2024 and sell it today you would lose (122.00) from holding Regency Centers or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Agree Realty  vs.  Regency Centers

Agree Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agree Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Regency Centers

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Agree Realty and Regency Centers

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

The idea behind Agree Realty and Regency Centers 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.