Correlation Between Real Estate and Hedge Real

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

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

Diversification Opportunities for Real Estate and Hedge Real

0.17

Correlation Coefficient

Real Estate  Hedge Real

Average diversification

The 3 months correlation between Real and Hedge is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Investment and Hedge Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hedge Real Estate and Real Estate 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 Real Estate Investment are associated (or correlated) with Hedge Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hedge Real Estate has no effect on the direction of Real Estate i.e., Real Estate and Hedge Real go up and down completely randomly.

Pair Corralation between Real Estate and Hedge Real

Assuming the 90 days trading horizon Real Estate Investment is expected to under-perform the Hedge Real. But the fund apears to be less risky and, when comparing its historical volatility, Real Estate Investment is 1.25 times less risky than Hedge Real. The fund trades about -0.15 of its potential returns per unit of risk. The Hedge Real Estate is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,165  in Hedge Real Estate on October 26, 2024 and sell it today you would earn a total of  635.00  from holding Hedge Real Estate or generate 7.78% return on investment over 90 days.

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

Real Estate Investment  vs.  Hedge Real Estate

Real Estate Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Investment has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Hedge Real Estate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hedge Real Estate are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental indicators, Hedge Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Estate and Hedge Real

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

The idea behind Real Estate Investment and Hedge 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.