Correlation Between Central Retail and BA Airport

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

By analyzing existing cross correlation between Central Retail and BA Airport Leasehold, you can compare the effects of market volatilities on Central Retail and BA Airport 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 Central Retail with a short position of BA Airport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Retail and BA Airport.

Diversification Opportunities for Central Retail and BA Airport

-0.22

Correlation Coefficient

Central Retail  BA Airport

Very good diversification

The 3 months correlation between Central and BAREIT is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Central Retail and BA Airport Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BA Airport Leasehold and Central Retail 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 Central Retail are associated (or correlated) with BA Airport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BA Airport Leasehold has no effect on the direction of Central Retail i.e., Central Retail and BA Airport go up and down completely randomly.

Pair Corralation between Central Retail and BA Airport

Assuming the 90 days trading horizon Central Retail is expected to generate 2.62 times more return on investment than BA Airport. However, Central Retail is 2.62 times more volatile than BA Airport Leasehold. It trades about 0.07 of its potential returns per unit of risk. BA Airport Leasehold is currently generating about -0.02 per unit of risk. If you would invest  3,175  in Central Retail on September 13, 2024 and sell it today you would earn a total of  250.00  from holding Central Retail or generate 7.87% return on investment over 90 days.

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

Central Retail  vs.  BA Airport Leasehold

Central Retail

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Central Retail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BA Airport Leasehold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BA Airport Leasehold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BA Airport is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Central Retail and BA Airport

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

The idea behind Central Retail and BA Airport Leasehold 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.