Correlation Between Plaza Retail and Slate Office

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

Diversification Opportunities for Plaza Retail and Slate Office

0.21

Correlation Coefficient

Plaza Retail  Slate Office

Modest diversification

The 3 months correlation between Plaza and Slate is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Slate Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Slate Office 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 Slate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Slate Office REIT has no effect on the direction of Plaza Retail i.e., Plaza Retail and Slate Office go up and down completely randomly.

Pair Corralation between Plaza Retail and Slate Office

Assuming the 90 days trading horizon Plaza Retail is expected to generate 24.4 times less return on investment than Slate Office. But when comparing it to its historical volatility, Plaza Retail REIT is 11.57 times less risky than Slate Office. It trades about 0.03 of its potential returns per unit of risk. Slate Office REIT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Slate Office REIT on September 3, 2024 and sell it today you would earn a total of  7.00  from holding Slate Office REIT or generate 19.44% return on investment over 90 days.

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

Plaza Retail REIT  vs.  Slate Office REIT

Plaza Retail REIT

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plaza Retail REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Slate Office REIT

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Slate Office REIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Slate Office sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plaza Retail and Slate Office

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

The idea behind Plaza Retail REIT and Slate Office 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.