Correlation Between Big Shopping and Reit 1

Can any of the company-specific risk be diversified away by investing in both Big Shopping and Reit 1 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 Big Shopping and Reit 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Shopping Centers and Reit 1, you can compare the effects of market volatilities on Big Shopping and Reit 1 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 Big Shopping with a short position of Reit 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Shopping and Reit 1.

Diversification Opportunities for Big Shopping and Reit 1

0.72

Correlation Coefficient

Big Shopping  Reit 1

Poor diversification

The 3 months correlation between Big and Reit is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Big Shopping Centers and Reit 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reit 1 and Big Shopping 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 Big Shopping Centers are associated (or correlated) with Reit 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reit 1 has no effect on the direction of Big Shopping i.e., Big Shopping and Reit 1 go up and down completely randomly.

Pair Corralation between Big Shopping and Reit 1

Assuming the 90 days trading horizon Big Shopping Centers is expected to generate 0.9 times more return on investment than Reit 1. However, Big Shopping Centers is 1.11 times less risky than Reit 1. It trades about -0.05 of its potential returns per unit of risk. Reit 1 is currently generating about -0.06 per unit of risk. If you would invest  5,370,000  in Big Shopping Centers on December 29, 2024 and sell it today you would lose (228,000) from holding Big Shopping Centers or give up 4.25% of portfolio value over 90 days.

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

Big Shopping Centers  vs.  Reit 1

Big Shopping Centers

Risk-Adjusted Performance

Very Weak

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

Reit 1

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reit 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Big Shopping and Reit 1

The main advantage of trading using opposite Big Shopping and Reit 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Shopping position performs unexpectedly, Reit 1 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 Reit 1 will offset losses from the drop in Reit 1's long position.

The idea behind Big Shopping Centers and Reit 1 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.