Correlation Between Real Estate and Tax-managed

Can any of the company-specific risk be diversified away by investing in both Real Estate and Tax-managed 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 Tax-managed 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 Tax Managed Mid Small, you can compare the effects of market volatilities on Real Estate and Tax-managed 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 Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and Tax-managed.

Diversification Opportunities for Real Estate and Tax-managed

0.51

Correlation Coefficient

Real Estate  Tax-managed

Very weak diversification

The 3 months correlation between Real and Tax-managed is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Securities and Tax Managed Mid Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Mid 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 Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Mid has no effect on the direction of Real Estate i.e., Real Estate and Tax-managed go up and down completely randomly.

Pair Corralation between Real Estate and Tax-managed

Assuming the 90 days horizon Real Estate Securities is expected to under-perform the Tax-managed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Real Estate Securities is 1.07 times less risky than Tax-managed. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Tax Managed Mid Small is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  4,508  in Tax Managed Mid Small on October 9, 2024 and sell it today you would lose (308.00) from holding Tax Managed Mid Small or give up 6.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

Real Estate Securities  vs.  Tax Managed Mid Small

Real Estate Securities

Risk-Adjusted Performance

0 of 100

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.

Tax Managed Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tax Managed Mid Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tax-managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Estate and Tax-managed

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

The idea behind Real Estate Securities and Tax Managed Mid Small 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 Anywhere module to track or share privately all of your investments from the convenience of any device.