Correlation Between Retail Estates and Wereldhav

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

By analyzing existing cross correlation between Retail Estates and Wereldhav B Sicafi, you can compare the effects of market volatilities on Retail Estates and Wereldhav 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 Retail Estates with a short position of Wereldhav. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and Wereldhav.

Diversification Opportunities for Retail Estates and Wereldhav

0.27

Correlation Coefficient

Retail Estates  Wereldhav

Modest diversification

The 3 months correlation between Retail and Wereldhav is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates and Wereldhav B Sicafi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wereldhav B Sicafi and Retail Estates 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 Retail Estates are associated (or correlated) with Wereldhav. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wereldhav B Sicafi has no effect on the direction of Retail Estates i.e., Retail Estates and Wereldhav go up and down completely randomly.

Pair Corralation between Retail Estates and Wereldhav

Assuming the 90 days trading horizon Retail Estates is expected to under-perform the Wereldhav. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates is 1.16 times less risky than Wereldhav. The stock trades about -0.01 of its potential returns per unit of risk. The Wereldhav B Sicafi is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,610  in Wereldhav B Sicafi on December 4, 2024 and sell it today you would earn a total of  590.00  from holding Wereldhav B Sicafi or generate 12.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Retail Estates   vs.  Wereldhav B Sicafi

Retail Estates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Retail Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Retail Estates is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Wereldhav B Sicafi

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wereldhav B Sicafi are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Wereldhav reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Retail Estates and Wereldhav

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

The idea behind Retail Estates and Wereldhav B Sicafi 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.