Correlation Between Income Growth and Cohen Steers

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

By analyzing existing cross correlation between Income Growth Fund and Cohen Steers Reit, you can compare the effects of market volatilities on Income Growth and Cohen Steers 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 Income Growth with a short position of Cohen Steers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Cohen Steers.

Diversification Opportunities for Income Growth and Cohen Steers

0.88

Correlation Coefficient

Income Growth  Cohen Steers

Very poor diversification

The 3 months correlation between Income and Cohen is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and Cohen Steers Reit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Steers Reit and Income Growth 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 Income Growth Fund are associated (or correlated) with Cohen Steers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Steers Reit has no effect on the direction of Income Growth i.e., Income Growth and Cohen Steers go up and down completely randomly.

Pair Corralation between Income Growth and Cohen Steers

Assuming the 90 days horizon Income Growth Fund is expected to under-perform the Cohen Steers. But the mutual fund apears to be less risky and, when comparing its historical volatility, Income Growth Fund is 1.4 times less risky than Cohen Steers. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Cohen Steers Reit is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,287  in Cohen Steers Reit on November 29, 2024 and sell it today you would lose (83.00) from holding Cohen Steers Reit or give up 3.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Income Growth Fund  vs.  Cohen Steers Reit

Income Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Income Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Income Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cohen Steers Reit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cohen Steers Reit has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable basic indicators, Cohen Steers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Income Growth and Cohen Steers

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

The idea behind Income Growth Fund and Cohen Steers Reit 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.