Correlation Between Riocan REIT and Klépierre

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

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

Diversification Opportunities for Riocan REIT and Klépierre

0.05

Correlation Coefficient

Riocan REIT  Klépierre

Significant diversification

The 3 months correlation between Riocan and Klépierre is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Riocan REIT and Klpierre SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klpierre SA and Riocan 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 Riocan REIT are associated (or correlated) with Klépierre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klpierre SA has no effect on the direction of Riocan REIT i.e., Riocan REIT and Klépierre go up and down completely randomly.

Pair Corralation between Riocan REIT and Klépierre

Assuming the 90 days horizon Riocan REIT is expected to under-perform the Klépierre. But the pink sheet apears to be less risky and, when comparing its historical volatility, Riocan REIT is 1.4 times less risky than Klépierre. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Klpierre SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,895  in Klpierre SA on December 27, 2024 and sell it today you would earn a total of  440.00  from holding Klpierre SA or generate 15.2% return on investment over 90 days.

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

Riocan REIT  vs.  Klpierre SA

Riocan REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Riocan REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Riocan REIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Klpierre SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Klpierre SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Klépierre reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Riocan REIT and Klépierre

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

The idea behind Riocan REIT and Klpierre SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.