Correlation Between Alstria Office and Japan Real

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

By analyzing existing cross correlation between alstria office REIT AG and Japan Real Estate, you can compare the effects of market volatilities on Alstria Office and Japan Real 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 Alstria Office with a short position of Japan Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alstria Office and Japan Real.

Diversification Opportunities for Alstria Office and Japan Real

-0.52

Correlation Coefficient

Alstria Office  Japan Real

Excellent diversification

The 3 months correlation between Alstria and Japan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding alstria office REIT AG and Japan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Real Estate and Alstria Office 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 alstria office REIT AG are associated (or correlated) with Japan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Real Estate has no effect on the direction of Alstria Office i.e., Alstria Office and Japan Real go up and down completely randomly.

Pair Corralation between Alstria Office and Japan Real

Assuming the 90 days horizon Alstria Office is expected to generate 11.58 times less return on investment than Japan Real. But when comparing it to its historical volatility, alstria office REIT AG is 30.12 times less risky than Japan Real. It trades about 0.25 of its potential returns per unit of risk. Japan Real Estate is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  354,000  in Japan Real Estate on September 26, 2024 and sell it today you would lose (30,000) from holding Japan Real Estate or give up 8.47% of portfolio value over 90 days.

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

alstria office REIT AG  vs.  Japan Real Estate

alstria office REIT

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in alstria office REIT AG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alstria Office reported solid returns over the last few months and may actually be approaching a breakup point.

Japan Real Estate

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Real Estate are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Real reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alstria Office and Japan Real

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

The idea behind alstria office REIT AG and Japan Real Estate 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.