Correlation Between Macerich and Federal Realty

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

By analyzing existing cross correlation between Macerich Company and Federal Realty Investment, you can compare the effects of market volatilities on Macerich and Federal Realty 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 Macerich with a short position of Federal Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macerich and Federal Realty.

Diversification Opportunities for Macerich and Federal Realty

0.12

Correlation Coefficient

Macerich  Federal Realty

Average diversification

The 3 months correlation between Macerich and Federal is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Macerich Company and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment and Macerich 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 Macerich Company are associated (or correlated) with Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Macerich i.e., Macerich and Federal Realty go up and down completely randomly.

Pair Corralation between Macerich and Federal Realty

Considering the 90-day investment horizon Macerich Company is expected to under-perform the Federal Realty. In addition to that, Macerich is 3.26 times more volatile than Federal Realty Investment. It trades about -0.09 of its total potential returns per unit of risk. Federal Realty Investment is currently generating about -0.02 per unit of volatility. If you would invest  2,084  in Federal Realty Investment on December 30, 2024 and sell it today you would lose (23.00) from holding Federal Realty Investment or give up 1.1% of portfolio value over 90 days.

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

Macerich Company  vs.  Federal Realty Investment

Macerich

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macerich Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Federal Realty Investment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Macerich and Federal Realty

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

The idea behind Macerich Company and Federal Realty Investment 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.