Correlation Between Plaza Retail and Riocan REIT

Can any of the company-specific risk be diversified away by investing in both Plaza Retail and Riocan REIT 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 Riocan REIT 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 Riocan REIT, you can compare the effects of market volatilities on Plaza Retail and Riocan REIT 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 Riocan REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plaza Retail and Riocan REIT.

Diversification Opportunities for Plaza Retail and Riocan REIT

0.84

Correlation Coefficient

Plaza Retail  Riocan REIT

Very poor diversification

The 3 months correlation between Plaza and Riocan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Riocan REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riocan REIT 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 Riocan REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riocan REIT has no effect on the direction of Plaza Retail i.e., Plaza Retail and Riocan REIT go up and down completely randomly.

Pair Corralation between Plaza Retail and Riocan REIT

Assuming the 90 days horizon Plaza Retail REIT is expected to under-perform the Riocan REIT. In addition to that, Plaza Retail is 1.07 times more volatile than Riocan REIT. It trades about -0.01 of its total potential returns per unit of risk. Riocan REIT is currently generating about 0.01 per unit of volatility. If you would invest  1,290  in Riocan REIT on October 7, 2024 and sell it today you would lose (4.00) from holding Riocan REIT or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	78.85%
Values	Daily Returns

Plaza Retail REIT  vs.  Riocan REIT

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Riocan REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Plaza Retail and Riocan REIT

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

The idea behind Plaza Retail REIT and Riocan REIT 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 Anywhere module to track or share privately all of your investments from the convenience of any device.