Correlation Between Douglas Elliman and Terreno Realty

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

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

Diversification Opportunities for Douglas Elliman and Terreno Realty

-0.25

Correlation Coefficient

Douglas Elliman  Terreno Realty

Very good diversification

The 3 months correlation between Douglas and Terreno is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Elliman and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty and Douglas Elliman 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 Douglas Elliman are associated (or correlated) with Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of Douglas Elliman i.e., Douglas Elliman and Terreno Realty go up and down completely randomly.

Pair Corralation between Douglas Elliman and Terreno Realty

Given the investment horizon of 90 days Douglas Elliman is expected to generate 3.33 times more return on investment than Terreno Realty. However, Douglas Elliman is 3.33 times more volatile than Terreno Realty. It trades about 0.05 of its potential returns per unit of risk. Terreno Realty is currently generating about -0.05 per unit of risk. If you would invest  157.00  in Douglas Elliman on October 9, 2024 and sell it today you would earn a total of  13.00  from holding Douglas Elliman or generate 8.28% return on investment over 90 days.

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

Douglas Elliman  vs.  Terreno Realty

Douglas Elliman

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Elliman are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Douglas Elliman reported solid returns over the last few months and may actually be approaching a breakup point.

Terreno Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terreno Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Terreno Realty is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Douglas Elliman and Terreno Realty

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

The idea behind Douglas Elliman and Terreno Realty 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..