Correlation Between Power REIT and New York

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

By analyzing existing cross correlation between Power REIT and New York Mortgage, you can compare the effects of market volatilities on Power REIT and New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power REIT and New York.

Diversification Opportunities for Power REIT and New York

-0.22

Correlation Coefficient

Power REIT  New York

Very good diversification

The 3 months correlation between Power and New is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Mortgage 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of Power REIT i.e., Power REIT and New York go up and down completely randomly.

Pair Corralation between Power REIT and New York

Allowing for the 90-day total investment horizon Power REIT is expected to under-perform the New York. In addition to that, Power REIT is 22.05 times more volatile than New York Mortgage. It trades about -0.02 of its total potential returns per unit of risk. New York Mortgage is currently generating about -0.02 per unit of volatility. If you would invest  2,455  in New York Mortgage on December 27, 2024 and sell it today you would lose (8.00) from holding New York Mortgage or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Power REIT  vs.  New York Mortgage

Power REIT

Risk-Adjusted Performance

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 fairly stable basic indicators, Power REIT is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

New York Mortgage

Risk-Adjusted Performance

Very Weak

Over the last 90 days New York Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, New York is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Power REIT and New York

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

The idea behind Power REIT and New York Mortgage 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.