Correlation Between Safe Bulkers and Power REIT

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

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

Diversification Opportunities for Safe Bulkers and Power REIT

-0.1

Correlation Coefficient

Safe Bulkers  Power REIT

Good diversification

The 3 months correlation between Safe and Power is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Power REIT PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT PFD and Safe Bulkers 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 Safe Bulkers are associated (or correlated) with Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT PFD has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and Power REIT go up and down completely randomly.

Pair Corralation between Safe Bulkers and Power REIT

Assuming the 90 days horizon Safe Bulkers is expected to generate 12.97 times less return on investment than Power REIT. But when comparing it to its historical volatility, Safe Bulkers is 15.8 times less risky than Power REIT. It trades about 0.06 of its potential returns per unit of risk. Power REIT PFD is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  359.00  in Power REIT PFD on October 22, 2024 and sell it today you would earn a total of  29.00  from holding Power REIT PFD or generate 8.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.07%
Values	Daily Returns

Safe Bulkers  vs.  Power REIT PFD

Safe Bulkers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe Bulkers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Safe Bulkers is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Power REIT PFD

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT PFD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Power REIT sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safe Bulkers and Power REIT

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

The idea behind Safe Bulkers and Power REIT PFD 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.