Correlation Between IShares Real and ALPS REIT

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

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

Diversification Opportunities for IShares Real and ALPS REIT

0.9

Correlation Coefficient

IShares Real  ALPS REIT

Almost no diversification

The 3 months correlation between IShares and ALPS is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Real Estate and ALPS REIT Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS REIT Dividend and IShares Real 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 iShares Real Estate are associated (or correlated) with ALPS REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS REIT Dividend has no effect on the direction of IShares Real i.e., IShares Real and ALPS REIT go up and down completely randomly.

Pair Corralation between IShares Real and ALPS REIT

Considering the 90-day investment horizon iShares Real Estate is expected to generate 0.97 times more return on investment than ALPS REIT. However, iShares Real Estate is 1.03 times less risky than ALPS REIT. It trades about -0.02 of its potential returns per unit of risk. ALPS REIT Dividend is currently generating about -0.05 per unit of risk. If you would invest  10,011  in iShares Real Estate on December 1, 2024 and sell it today you would lose (170.00) from holding iShares Real Estate or give up 1.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares Real Estate  vs.  ALPS REIT Dividend

iShares Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IShares Real is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

ALPS REIT Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPS REIT Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ALPS REIT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Real and ALPS REIT

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

The idea behind iShares Real Estate and ALPS REIT Dividend 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.