Correlation Between North American and Vicinity Centres

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

By analyzing existing cross correlation between North American Construction and Vicinity Centres, you can compare the effects of market volatilities on North American and Vicinity Centres 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 North American with a short position of Vicinity Centres. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Vicinity Centres.

Diversification Opportunities for North American and Vicinity Centres

-0.07

Correlation Coefficient

North American  Vicinity Centres

Good diversification

The 3 months correlation between North and Vicinity is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Vicinity Centres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Centres and North American 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 North American Construction are associated (or correlated) with Vicinity Centres. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Centres has no effect on the direction of North American i.e., North American and Vicinity Centres go up and down completely randomly.

Pair Corralation between North American and Vicinity Centres

Assuming the 90 days horizon North American Construction is expected to under-perform the Vicinity Centres. In addition to that, North American is 1.03 times more volatile than Vicinity Centres. It trades about -0.15 of its total potential returns per unit of risk. Vicinity Centres is currently generating about 0.05 per unit of volatility. If you would invest  116.00  in Vicinity Centres on December 29, 2024 and sell it today you would earn a total of  7.00  from holding Vicinity Centres or generate 6.03% return on investment over 90 days.

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

North American Construction  vs.  Vicinity Centres

North American Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Vicinity Centres

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vicinity Centres are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vicinity Centres may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with North American and Vicinity Centres

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

The idea behind North American Construction and Vicinity Centres 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.