Correlation Between Rithm Property and Smart REIT

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

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

Diversification Opportunities for Rithm Property and Smart REIT

0.7

Correlation Coefficient

Rithm Property  Smart REIT

Poor diversification

The 3 months correlation between Rithm and Smart is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Property Trust and Smart REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart REIT and Rithm Property 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 Rithm Property Trust are associated (or correlated) with Smart REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart REIT has no effect on the direction of Rithm Property i.e., Rithm Property and Smart REIT go up and down completely randomly.

Pair Corralation between Rithm Property and Smart REIT

Considering the 90-day investment horizon Rithm Property is expected to generate 7.51 times less return on investment than Smart REIT. In addition to that, Rithm Property is 1.77 times more volatile than Smart REIT. It trades about 0.0 of its total potential returns per unit of risk. Smart REIT is currently generating about 0.05 per unit of volatility. If you would invest  1,708  in Smart REIT on December 27, 2024 and sell it today you would earn a total of  64.00  from holding Smart REIT or generate 3.75% return on investment over 90 days.

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

Rithm Property Trust  vs.  Smart REIT

Rithm Property Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rithm Property Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rithm Property is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Smart REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Smart REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Smart REIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rithm Property and Smart REIT

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

The idea behind Rithm Property Trust and Smart 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.