Correlation Between Automotive Properties and True North

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

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

Diversification Opportunities for Automotive Properties and True North

0.71

Correlation Coefficient

Automotive Properties  True North

Poor diversification

The 3 months correlation between Automotive and True is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Properties Real and True North Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True North Commercial and Automotive 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 Automotive Properties Real are associated (or correlated) with True North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True North Commercial has no effect on the direction of Automotive Properties i.e., Automotive Properties and True North go up and down completely randomly.

Pair Corralation between Automotive Properties and True North

Assuming the 90 days trading horizon Automotive Properties Real is expected to generate 0.42 times more return on investment than True North. However, Automotive Properties Real is 2.39 times less risky than True North. It trades about -0.03 of its potential returns per unit of risk. True North Commercial is currently generating about -0.02 per unit of risk. If you would invest  1,155  in Automotive Properties Real on September 4, 2024 and sell it today you would lose (31.00) from holding Automotive Properties Real or give up 2.68% of portfolio value over 90 days.

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

Automotive Properties Real  vs.  True North Commercial

Automotive Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automotive Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automotive Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

True North Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days True North Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, True North is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Automotive Properties and True North

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

The idea behind Automotive Properties Real and True North Commercial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.