Correlation Between Power REIT and American Assets

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

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

Diversification Opportunities for Power REIT and American Assets

0.28

Correlation Coefficient

Power REIT  American Assets

Modest diversification

The 3 months correlation between Power and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and American Assets Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Assets Trust and Power REIT 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 Power REIT are associated (or correlated) with American Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Assets Trust has no effect on the direction of Power REIT i.e., Power REIT and American Assets go up and down completely randomly.

Pair Corralation between Power REIT and American Assets

Allowing for the 90-day total investment horizon Power REIT is expected to generate 10.76 times more return on investment than American Assets. However, Power REIT is 10.76 times more volatile than American Assets Trust. It trades about 0.05 of its potential returns per unit of risk. American Assets Trust is currently generating about 0.0 per unit of risk. If you would invest  125.00  in Power REIT on October 3, 2024 and sell it today you would earn a total of  1.00  from holding Power REIT or generate 0.8% return on investment over 90 days.

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

Power REIT  vs.  American Assets Trust

Power REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

American Assets Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Assets Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, American Assets is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Power REIT and American Assets

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

The idea behind Power REIT and American Assets Trust 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.