Correlation Between Riocan REIT and Plaza Retail

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

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

Diversification Opportunities for Riocan REIT and Plaza Retail

-0.3

Correlation Coefficient

Riocan REIT  Plaza Retail

Very good diversification

The 3 months correlation between Riocan and Plaza is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Riocan REIT and Plaza Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Retail REIT 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 Plaza Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Retail REIT has no effect on the direction of Riocan REIT i.e., Riocan REIT and Plaza Retail go up and down completely randomly.

Pair Corralation between Riocan REIT and Plaza Retail

Assuming the 90 days horizon Riocan REIT is expected to generate 1.24 times more return on investment than Plaza Retail. However, Riocan REIT is 1.24 times more volatile than Plaza Retail REIT. It trades about 0.21 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about 0.25 per unit of risk. If you would invest  1,241  in Riocan REIT on December 3, 2024 and sell it today you would earn a total of  86.00  from holding Riocan REIT or generate 6.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Riocan REIT  vs.  Plaza Retail REIT

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.

Plaza Retail REIT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Plaza Retail REIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Plaza Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Riocan REIT and Plaza Retail

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

The idea behind Riocan REIT and Plaza Retail REIT 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.