Correlation Between Plaza Retail and Klpierre

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

By analyzing existing cross correlation between Plaza Retail REIT and Klpierre SA, you can compare the effects of market volatilities on Plaza Retail and Klpierre 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 Plaza Retail with a short position of Klpierre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plaza Retail and Klpierre.

Diversification Opportunities for Plaza Retail and Klpierre

0.7

Correlation Coefficient

Plaza Retail  Klpierre

Poor diversification

The 3 months correlation between Plaza and Klpierre is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Klpierre SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klpierre SA and Plaza Retail 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 Plaza Retail REIT are associated (or correlated) with Klpierre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klpierre SA has no effect on the direction of Plaza Retail i.e., Plaza Retail and Klpierre go up and down completely randomly.

Pair Corralation between Plaza Retail and Klpierre

Assuming the 90 days horizon Plaza Retail REIT is expected to under-perform the Klpierre. But the pink sheet apears to be less risky and, when comparing its historical volatility, Plaza Retail REIT is 1.93 times less risky than Klpierre. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Klpierre SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,183  in Klpierre SA on September 12, 2024 and sell it today you would lose (84.00) from holding Klpierre SA or give up 2.64% of portfolio value over 90 days.

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

Plaza Retail REIT  vs.  Klpierre SA

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Klpierre SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Plaza Retail and Klpierre

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

The idea behind Plaza Retail REIT and Klpierre SA 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.