Correlation Between Industrial and Gateway Real

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

By analyzing existing cross correlation between Industrial and Commercial and Gateway Real Estate, you can compare the effects of market volatilities on Industrial and Gateway Real 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 Industrial with a short position of Gateway Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Gateway Real.

Diversification Opportunities for Industrial and Gateway Real

0.32

Correlation Coefficient

Industrial  Gateway Real

Weak diversification

The 3 months correlation between Industrial and Gateway is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Gateway Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Real Estate and Industrial 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 Industrial and Commercial are associated (or correlated) with Gateway Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Real Estate has no effect on the direction of Industrial i.e., Industrial and Gateway Real go up and down completely randomly.

Pair Corralation between Industrial and Gateway Real

Assuming the 90 days horizon Industrial is expected to generate 4.74 times less return on investment than Gateway Real. But when comparing it to its historical volatility, Industrial and Commercial is 6.93 times less risky than Gateway Real. It trades about 0.29 of its potential returns per unit of risk. Gateway Real Estate is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Gateway Real Estate on October 20, 2024 and sell it today you would earn a total of  55.00  from holding Gateway Real Estate or generate 114.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Industrial and Commercial  vs.  Gateway Real Estate

Industrial and Commercial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

Gateway Real Estate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gateway Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gateway Real unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Gateway Real

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

The idea behind Industrial and Commercial and Gateway Real Estate 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.