Correlation Between Financial and Plaza Retail

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

By analyzing existing cross correlation between Financial 15 Split and Plaza Retail REIT, you can compare the effects of market volatilities on Financial and Plaza Retail 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 Financial with a short position of Plaza Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Plaza Retail.

Diversification Opportunities for Financial and Plaza Retail

-0.83

Correlation Coefficient

Financial  Plaza Retail

Pay attention - limited upside

The 3 months correlation between Financial and Plaza is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Plaza Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Retail REIT and Financial 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 Financial 15 Split are associated (or correlated) with Plaza Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Retail REIT has no effect on the direction of Financial i.e., Financial and Plaza Retail go up and down completely randomly.

Pair Corralation between Financial and Plaza Retail

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.29 times more return on investment than Plaza Retail. However, Financial 15 Split is 3.44 times less risky than Plaza Retail. It trades about 0.16 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about -0.01 per unit of risk. If you would invest  828.00  in Financial 15 Split on September 19, 2024 and sell it today you would earn a total of  231.00  from holding Financial 15 Split or generate 27.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Financial 15 Split  vs.  Plaza Retail REIT

Financial 15 Split

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Financial and Plaza Retail

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

The idea behind Financial 15 Split and Plaza Retail REIT 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.