Correlation Between BSR Real and Dream Residential

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

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

Diversification Opportunities for BSR Real and Dream Residential

0.38

Correlation Coefficient

BSR Real  Dream Residential

Weak diversification

The 3 months correlation between BSR and Dream is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding BSR Real Estate and Dream Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Residential Real and BSR Real 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 BSR Real Estate are associated (or correlated) with Dream Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Residential Real has no effect on the direction of BSR Real i.e., BSR Real and Dream Residential go up and down completely randomly.

Pair Corralation between BSR Real and Dream Residential

Assuming the 90 days horizon BSR Real is expected to generate 29.68 times less return on investment than Dream Residential. But when comparing it to its historical volatility, BSR Real Estate is 1.63 times less risky than Dream Residential. It trades about 0.01 of its potential returns per unit of risk. Dream Residential Real is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Dream Residential Real on December 20, 2024 and sell it today you would earn a total of  278.00  from holding Dream Residential Real or generate 42.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

BSR Real Estate  vs.  Dream Residential Real

BSR Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days BSR Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BSR Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Dream Residential Real

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Residential Real are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Dream Residential reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BSR Real and Dream Residential

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

The idea behind BSR Real Estate and Dream Residential Real 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.