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
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Financial and Plaza is 0.21. 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 is expected to generate 4.72 times less return on investment than Plaza Retail. But when comparing it to its historical volatility, Financial 15 Split is 2.6 times less risky than Plaza Retail. It trades about 0.07 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 355.00 in Plaza Retail REIT on December 11, 2024 and sell it today you would earn a total of 24.00 from holding Plaza Retail REIT or generate 6.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Financial 15 Split vs. Plaza Retail REIT
Performance |
Timeline |
Financial 15 Split |
Plaza Retail REIT |
Financial and Plaza Retail Volatility Contrast
Predicted Return Density |
Returns |
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.Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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