Correlation Between Kite Realty and Retail Opportunity

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

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

Diversification Opportunities for Kite Realty and Retail Opportunity

-0.81

Correlation Coefficient

Kite Realty  Retail Opportunity

Pay attention - limited upside

The 3 months correlation between Kite and Retail is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Kite Realty Group and Retail Opportunity Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Opportunity and Kite Realty 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 Kite Realty Group are associated (or correlated) with Retail Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Opportunity has no effect on the direction of Kite Realty i.e., Kite Realty and Retail Opportunity go up and down completely randomly.

Pair Corralation between Kite Realty and Retail Opportunity

Considering the 90-day investment horizon Kite Realty Group is expected to under-perform the Retail Opportunity. In addition to that, Kite Realty is 12.52 times more volatile than Retail Opportunity Investments. It trades about -0.08 of its total potential returns per unit of risk. Retail Opportunity Investments is currently generating about 0.19 per unit of volatility. If you would invest  1,735  in Retail Opportunity Investments on December 27, 2024 and sell it today you would earn a total of  14.00  from holding Retail Opportunity Investments or generate 0.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	52.46%
Values	Daily Returns

Kite Realty Group  vs.  Retail Opportunity Investments

Kite Realty Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kite Realty Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Retail Opportunity

Risk-Adjusted Performance

Good

Over the last 90 days Retail Opportunity Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Retail Opportunity is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kite Realty and Retail Opportunity

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

The idea behind Kite Realty Group and Retail Opportunity Investments 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.