Correlation Between Choice Properties and Riocan REIT

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

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

Diversification Opportunities for Choice Properties and Riocan REIT

0.04

Correlation Coefficient

Choice Properties  Riocan REIT

Significant diversification

The 3 months correlation between Choice and Riocan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Choice Properties Real and Riocan REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riocan REIT and Choice Properties 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 Choice Properties Real 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 Choice Properties i.e., Choice Properties and Riocan REIT go up and down completely randomly.

Pair Corralation between Choice Properties and Riocan REIT

Assuming the 90 days horizon Choice Properties Real is expected to generate 3.01 times more return on investment than Riocan REIT. However, Choice Properties is 3.01 times more volatile than Riocan REIT. It trades about 0.16 of its potential returns per unit of risk. Riocan REIT is currently generating about -0.04 per unit of risk. If you would invest  690.00  in Choice Properties Real on December 28, 2024 and sell it today you would earn a total of  280.00  from holding Choice Properties Real or generate 40.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Choice Properties Real  vs.  Riocan REIT

Choice Properties Real

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Properties Real are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Choice Properties reported solid returns over the last few months and may actually be approaching a breakup point.

Riocan REIT

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Choice Properties and Riocan REIT

The main advantage of trading using opposite Choice Properties and Riocan REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Properties 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 Choice Properties Real 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.