Correlation Between Smart REIT and Klépierre

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

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

Diversification Opportunities for Smart REIT and Klépierre

0.62

Correlation Coefficient

Smart REIT  Klépierre

Poor diversification

The 3 months correlation between Smart and Klépierre is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Smart REIT and Klpierre SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klpierre SA and Smart REIT 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 Smart REIT are associated (or correlated) with Klépierre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klpierre SA has no effect on the direction of Smart REIT i.e., Smart REIT and Klépierre go up and down completely randomly.

Pair Corralation between Smart REIT and Klépierre

Assuming the 90 days horizon Smart REIT is expected to generate 4.91 times less return on investment than Klépierre. But when comparing it to its historical volatility, Smart REIT is 1.57 times less risky than Klépierre. It trades about 0.05 of its potential returns per unit of risk. Klpierre SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,811  in Klpierre SA on December 29, 2024 and sell it today you would earn a total of  527.00  from holding Klpierre SA or generate 18.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Smart REIT  vs.  Klpierre SA

Smart REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Smart REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Smart REIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Klpierre SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Klpierre SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Klépierre reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smart REIT and Klépierre

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

The idea behind Smart REIT and Klpierre SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..