Correlation Between Rocky Mountain and Plaza Retail

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

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

Diversification Opportunities for Rocky Mountain and Plaza Retail

0.8

Correlation Coefficient

Rocky Mountain  Plaza Retail

Very poor diversification

The 3 months correlation between Rocky and Plaza is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor 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 Rocky Mountain 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 Rocky Mountain Liquor 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 Rocky Mountain i.e., Rocky Mountain and Plaza Retail go up and down completely randomly.

Pair Corralation between Rocky Mountain and Plaza Retail

Assuming the 90 days horizon Rocky Mountain Liquor is expected to under-perform the Plaza Retail. In addition to that, Rocky Mountain is 9.76 times more volatile than Plaza Retail REIT. It trades about -0.19 of its total potential returns per unit of risk. Plaza Retail REIT is currently generating about -0.27 per unit of volatility. If you would invest  372.00  in Plaza Retail REIT on September 19, 2024 and sell it today you would lose (12.00) from holding Plaza Retail REIT or give up 3.23% of portfolio value over 90 days.

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

Rocky Mountain Liquor  vs.  Plaza Retail REIT

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rocky Mountain and Plaza Retail

The main advantage of trading using opposite Rocky Mountain and Plaza Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain 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 Rocky Mountain Liquor 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.