Correlation Between Real Estate and Balanced Fund | PREPX vs. TWBIX

Correlation Between Real Estate and Balanced Fund

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Can any of the company-specific risk be diversified away by investing in both Real Estate and Balanced Fund 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 Real Estate and Balanced Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Estate Securities and Balanced Fund Investor, you can compare the effects of market volatilities on Real Estate and Balanced Fund 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 Real Estate with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and Balanced Fund.

Diversification Opportunities for Real Estate and Balanced Fund

RealBalancedDiversified AwayRealBalancedDiversified Away100%
0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Real and Balanced is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Securities and Balanced Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Investor and Real Estate 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 Real Estate Securities are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Investor has no effect on the direction of Real Estate i.e., Real Estate and Balanced Fund go up and down completely randomly.

Pair Corralation between Real Estate and Balanced Fund

Assuming the 90 days horizon Real Estate is expected to generate 1.36 times less return on investment than Balanced Fund. In addition to that, Real Estate is 2.05 times more volatile than Balanced Fund Investor. It trades about 0.04 of its total potential returns per unit of risk. Balanced Fund Investor is currently generating about 0.1 per unit of volatility. If you would invest  1,523  in Balanced Fund Investor on September 23, 2024 and sell it today you would earn a total of  458.00  from holding Balanced Fund Investor or generate 30.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Real Estate Securities  vs.  Balanced Fund Investor

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -4-3-2-1012
JavaScript chart by amCharts 3.21.15PREPX TWBIX
       Timeline  
Real Estate Securities 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2727.52828.52929.5
Balanced Fund Investor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Balanced Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec19.619.719.819.92020.120.220.320.4

Real Estate and Balanced Fund Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.61-1.22-0.83-0.44-0.06690.20.590.981.37 0.51.01.5
JavaScript chart by amCharts 3.21.15PREPX TWBIX
       Returns  

Pair Trading with Real Estate and Balanced Fund

The main advantage of trading using opposite Real Estate and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate position performs unexpectedly, Balanced Fund 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.
The idea behind Real Estate Securities and Balanced Fund Investor 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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