Correlation Between Allied Properties and Chartwell Retirement

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

By analyzing existing cross correlation between Allied Properties Real and Chartwell Retirement Residences, you can compare the effects of market volatilities on Allied Properties and Chartwell Retirement 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 Allied Properties with a short position of Chartwell Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Properties and Chartwell Retirement.

Diversification Opportunities for Allied Properties and Chartwell Retirement

0.17

Correlation Coefficient

Allied Properties  Chartwell Retirement

Average diversification

The 3 months correlation between Allied and Chartwell is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Allied Properties Real and Chartwell Retirement Residence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chartwell Retirement and Allied Properties 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 Allied Properties Real are associated (or correlated) with Chartwell Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chartwell Retirement has no effect on the direction of Allied Properties i.e., Allied Properties and Chartwell Retirement go up and down completely randomly.

Pair Corralation between Allied Properties and Chartwell Retirement

Assuming the 90 days trading horizon Allied Properties Real is expected to under-perform the Chartwell Retirement. In addition to that, Allied Properties is 1.07 times more volatile than Chartwell Retirement Residences. It trades about -0.05 of its total potential returns per unit of risk. Chartwell Retirement Residences is currently generating about 0.07 per unit of volatility. If you would invest  1,615  in Chartwell Retirement Residences on November 29, 2024 and sell it today you would earn a total of  67.00  from holding Chartwell Retirement Residences or generate 4.15% return on investment over 90 days.

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

Allied Properties Real  vs.  Chartwell Retirement Residence

Allied Properties Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Properties is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Chartwell Retirement

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chartwell Retirement Residences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Chartwell Retirement is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allied Properties and Chartwell Retirement

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

The idea behind Allied Properties Real and Chartwell Retirement Residences 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.