Correlation Between Saul Centers and Federal Realty

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

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

Diversification Opportunities for Saul Centers and Federal Realty

0.7

Correlation Coefficient

Saul Centers  Federal Realty

Poor diversification

The 3 months correlation between Saul and Federal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Saul Centers and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment and Saul Centers 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 Saul Centers are associated (or correlated) with Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Saul Centers i.e., Saul Centers and Federal Realty go up and down completely randomly.

Pair Corralation between Saul Centers and Federal Realty

Considering the 90-day investment horizon Saul Centers is expected to generate 0.77 times more return on investment than Federal Realty. However, Saul Centers is 1.3 times less risky than Federal Realty. It trades about -0.05 of its potential returns per unit of risk. Federal Realty Investment is currently generating about -0.11 per unit of risk. If you would invest  3,763  in Saul Centers on December 19, 2024 and sell it today you would lose (136.00) from holding Saul Centers or give up 3.61% of portfolio value over 90 days.

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

Saul Centers  vs.  Federal Realty Investment

Saul Centers

Risk-Adjusted Performance

Very Weak

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

Federal Realty Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Realty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Saul Centers and Federal Realty

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

The idea behind Saul Centers and Federal Realty Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.