Correlation Between Plaza Retail and Nutrien

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

Diversification Opportunities for Plaza Retail and Nutrien

0.11

Correlation Coefficient

Plaza Retail  Nutrien

Average diversification

The 3 months correlation between Plaza and Nutrien is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien 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 Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Plaza Retail i.e., Plaza Retail and Nutrien go up and down completely randomly.

Pair Corralation between Plaza Retail and Nutrien

Assuming the 90 days trading horizon Plaza Retail REIT is expected to generate 0.6 times more return on investment than Nutrien. However, Plaza Retail REIT is 1.67 times less risky than Nutrien. It trades about -0.01 of its potential returns per unit of risk. Nutrien is currently generating about -0.03 per unit of risk. If you would invest  384.00  in Plaza Retail REIT on October 10, 2024 and sell it today you would lose (23.00) from holding Plaza Retail REIT or give up 5.99% of portfolio value over 90 days.

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

Plaza Retail REIT  vs.  Nutrien

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 somewhat strong basic indicators, Plaza Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nutrien

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Nutrien is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Plaza Retail and Nutrien

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

The idea behind Plaza Retail REIT and Nutrien 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.