Correlation Between Canadian Apartment and Allied Properties

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

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

Diversification Opportunities for Canadian Apartment and Allied Properties

0.2

Correlation Coefficient

Canadian Apartment  Allied Properties

Modest diversification

The 3 months correlation between Canadian and Allied is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Apartment Properties and Allied Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Properties Real and Canadian Apartment 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 Canadian Apartment Properties are associated (or correlated) with Allied Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Properties Real has no effect on the direction of Canadian Apartment i.e., Canadian Apartment and Allied Properties go up and down completely randomly.

Pair Corralation between Canadian Apartment and Allied Properties

Assuming the 90 days trading horizon Canadian Apartment Properties is expected to under-perform the Allied Properties. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Apartment Properties is 1.21 times less risky than Allied Properties. The stock trades about -0.17 of its potential returns per unit of risk. The Allied Properties Real is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,676  in Allied Properties Real on August 31, 2024 and sell it today you would earn a total of  144.00  from holding Allied Properties Real or generate 8.59% return on investment over 90 days.

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

Canadian Apartment Properties  vs.  Allied Properties Real

Canadian Apartment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Apartment Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Allied Properties Real

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Properties Real are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Allied Properties may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Canadian Apartment and Allied Properties

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

The idea behind Canadian Apartment Properties and Allied Properties 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.