Correlation Between Riocan REIT and Retail Opportunity

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

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

Diversification Opportunities for Riocan REIT and Retail Opportunity

-0.74

Correlation Coefficient

Riocan REIT  Retail Opportunity

Pay attention - limited upside

The 3 months correlation between Riocan and Retail is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Riocan REIT and Retail Opportunity Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Opportunity 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 Retail Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Opportunity has no effect on the direction of Riocan REIT i.e., Riocan REIT and Retail Opportunity go up and down completely randomly.

Pair Corralation between Riocan REIT and Retail Opportunity

Assuming the 90 days horizon Riocan REIT is expected to under-perform the Retail Opportunity. In addition to that, Riocan REIT is 6.32 times more volatile than Retail Opportunity Investments. It trades about -0.04 of its total potential returns per unit of risk. Retail Opportunity Investments is currently generating about 0.27 per unit of volatility. If you would invest  1,731  in Retail Opportunity Investments on October 21, 2024 and sell it today you would earn a total of  14.00  from holding Retail Opportunity Investments or generate 0.81% return on investment over 90 days.

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

Riocan REIT  vs.  Retail Opportunity Investments

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 latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Retail Opportunity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Opportunity Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Retail Opportunity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Riocan REIT and Retail Opportunity

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

The idea behind Riocan REIT and Retail Opportunity Investments 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.