Correlation Between Riocan REIT and Choice Properties

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

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

Diversification Opportunities for Riocan REIT and Choice Properties

0.89

Correlation Coefficient

Riocan REIT  Choice Properties

Very poor diversification

The 3 months correlation between Riocan and Choice is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Riocan REIT and Choice Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Properties Real 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 Choice Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Properties Real has no effect on the direction of Riocan REIT i.e., Riocan REIT and Choice Properties go up and down completely randomly.

Pair Corralation between Riocan REIT and Choice Properties

Assuming the 90 days horizon Riocan REIT is expected to under-perform the Choice Properties. In addition to that, Riocan REIT is 1.1 times more volatile than Choice Properties Real. It trades about -0.19 of its total potential returns per unit of risk. Choice Properties Real is currently generating about -0.14 per unit of volatility. If you would invest  1,071  in Choice Properties Real on September 13, 2024 and sell it today you would lose (101.00) from holding Choice Properties Real or give up 9.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	92.06%
Values	Daily Returns

Riocan REIT  vs.  Choice Properties Real

Riocan REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riocan REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Choice Properties Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choice Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Riocan REIT and Choice Properties

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

The idea behind Riocan REIT and Choice Properties Real 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.