Correlation Between Preferred Securities and Cohen Steers

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

By analyzing existing cross correlation between Preferred Securities Fund and Cohen Steers Prefrd, you can compare the effects of market volatilities on Preferred Securities and Cohen Steers 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 Preferred Securities with a short position of Cohen Steers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Securities and Cohen Steers.

Diversification Opportunities for Preferred Securities and Cohen Steers

0.93

Correlation Coefficient

Preferred Securities  Cohen Steers

Almost no diversification

The 3 months correlation between Preferred and Cohen is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Securities Fund and Cohen Steers Prefrd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Steers Prefrd and Preferred Securities 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 Preferred Securities Fund are associated (or correlated) with Cohen Steers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Steers Prefrd has no effect on the direction of Preferred Securities i.e., Preferred Securities and Cohen Steers go up and down completely randomly.

Pair Corralation between Preferred Securities and Cohen Steers

Assuming the 90 days horizon Preferred Securities is expected to generate 1.33 times less return on investment than Cohen Steers. But when comparing it to its historical volatility, Preferred Securities Fund is 1.19 times less risky than Cohen Steers. It trades about 0.11 of its potential returns per unit of risk. Cohen Steers Prefrd is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,218  in Cohen Steers Prefrd on September 12, 2024 and sell it today you would earn a total of  14.00  from holding Cohen Steers Prefrd or generate 1.15% return on investment over 90 days.

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

Preferred Securities Fund  vs.  Cohen Steers Prefrd

Preferred Securities

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Securities Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Preferred Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cohen Steers Prefrd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Steers Prefrd are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Cohen Steers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Preferred Securities and Cohen Steers

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

The idea behind Preferred Securities Fund and Cohen Steers Prefrd 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.