Correlation Between American Realty and AMREP

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

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

Diversification Opportunities for American Realty and AMREP

0.66

Correlation Coefficient

American Realty  AMREP

Poor diversification

The 3 months correlation between American and AMREP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Realty Investors and AMREP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMREP and American Realty 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 American Realty Investors are associated (or correlated) with AMREP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMREP has no effect on the direction of American Realty i.e., American Realty and AMREP go up and down completely randomly.

Pair Corralation between American Realty and AMREP

Considering the 90-day investment horizon American Realty Investors is expected to under-perform the AMREP. In addition to that, American Realty is 1.15 times more volatile than AMREP. It trades about -0.54 of its total potential returns per unit of risk. AMREP is currently generating about -0.12 per unit of volatility. If you would invest  3,128  in AMREP on November 19, 2024 and sell it today you would lose (143.00) from holding AMREP or give up 4.57% of portfolio value over 90 days.

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

American Realty Investors  vs.  AMREP

American Realty Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Realty Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, American Realty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

AMREP

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMREP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with American Realty and AMREP

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

The idea behind American Realty Investors and AMREP 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.

Check out your portfolio center.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.