Correlation Between Carlyle and Power REIT

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

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

Diversification Opportunities for Carlyle and Power REIT

0.45

Correlation Coefficient

Carlyle  Power REIT

Very weak diversification

The 3 months correlation between Carlyle and Power is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT and Carlyle 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 Carlyle Group are associated (or correlated) with Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT has no effect on the direction of Carlyle i.e., Carlyle and Power REIT go up and down completely randomly.

Pair Corralation between Carlyle and Power REIT

Allowing for the 90-day total investment horizon Carlyle Group is expected to under-perform the Power REIT. But the stock apears to be less risky and, when comparing its historical volatility, Carlyle Group is 1.88 times less risky than Power REIT. The stock trades about -0.04 of its potential returns per unit of risk. The Power REIT is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Power REIT on December 27, 2024 and sell it today you would lose (15.00) from holding Power REIT or give up 11.28% of portfolio value over 90 days.

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

Carlyle Group  vs.  Power REIT

Carlyle Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Power REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Power REIT is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Carlyle and Power REIT

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

The idea behind Carlyle Group and Power REIT 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.