Correlation Between Real Estate and Short Real

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

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

Diversification Opportunities for Real Estate and Short Real

-0.9

Correlation Coefficient

Real Estate  Short Real

Pay attention - limited upside

The 3 months correlation between Real and Short is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Fund and Short Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Real Estate and Real Estate 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 Real Estate Fund are associated (or correlated) with Short Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Real Estate has no effect on the direction of Real Estate i.e., Real Estate and Short Real go up and down completely randomly.

Pair Corralation between Real Estate and Short Real

Assuming the 90 days horizon Real Estate Fund is expected to generate 0.99 times more return on investment than Short Real. However, Real Estate Fund is 1.01 times less risky than Short Real. It trades about 0.04 of its potential returns per unit of risk. Short Real Estate is currently generating about -0.04 per unit of risk. If you would invest  2,617  in Real Estate Fund on December 20, 2024 and sell it today you would earn a total of  51.00  from holding Real Estate Fund or generate 1.95% return on investment over 90 days.

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

Real Estate Fund  vs.  Short Real Estate

Real Estate Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Real Estate Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Real Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Short Real Estate

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Real Estate and Short Real

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

The idea behind Real Estate Fund and Short 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.