Correlation Between Crombie Real and Allied Properties

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

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

Diversification Opportunities for Crombie Real and Allied Properties

0.61

Correlation Coefficient

Crombie Real  Allied Properties

Poor diversification

The 3 months correlation between Crombie and Allied is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Crombie Real Estate 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 Crombie 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 Crombie Real Estate 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 Crombie Real i.e., Crombie Real and Allied Properties go up and down completely randomly.

Pair Corralation between Crombie Real and Allied Properties

Assuming the 90 days trading horizon Crombie Real Estate is expected to under-perform the Allied Properties. But the stock apears to be less risky and, when comparing its historical volatility, Crombie Real Estate is 1.49 times less risky than Allied Properties. The stock trades about -0.03 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 September 2, 2024 and sell it today you would earn a total of  141.00  from holding Allied Properties Real or generate 8.41% return on investment over 90 days.

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

Crombie Real Estate  vs.  Allied Properties Real

Crombie Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crombie Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crombie Real is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the 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 January 2025.

Pair Trading with Crombie Real and Allied Properties

The main advantage of trading using opposite Crombie Real and Allied Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crombie Real 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 Crombie Real Estate 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.