Correlation Between Smart REIT and Retail Opportunity

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

By analyzing existing cross correlation between Smart REIT and Retail Opportunity Investments, you can compare the effects of market volatilities on Smart REIT and Retail Opportunity 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 Retail Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart REIT and Retail Opportunity.

Diversification Opportunities for Smart REIT and Retail Opportunity

-0.53

Correlation Coefficient

Smart REIT  Retail Opportunity

Excellent diversification

The 3 months correlation between Smart and Retail is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Smart REIT and Retail Opportunity Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Opportunity 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 Retail Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Opportunity has no effect on the direction of Smart REIT i.e., Smart REIT and Retail Opportunity go up and down completely randomly.

Pair Corralation between Smart REIT and Retail Opportunity

Assuming the 90 days horizon Smart REIT is expected to generate 2.83 times less return on investment than Retail Opportunity. But when comparing it to its historical volatility, Smart REIT is 1.0 times less risky than Retail Opportunity. It trades about 0.02 of its potential returns per unit of risk. Retail Opportunity Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,346  in Retail Opportunity Investments on September 13, 2024 and sell it today you would earn a total of  400.00  from holding Retail Opportunity Investments or generate 29.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.18%
Values	Daily Returns

Smart REIT  vs.  Retail Opportunity Investments

Smart REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Retail Opportunity

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Opportunity Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Retail Opportunity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smart REIT and Retail Opportunity

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

The idea behind Smart REIT and Retail Opportunity Investments 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.