Correlation Between Spirit Of and Power REIT

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

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

Diversification Opportunities for Spirit Of and Power REIT

-0.14

Correlation Coefficient

Spirit Of  Power REIT

Good diversification

The 3 months correlation between Spirit and Power is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Of America and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT and Spirit Of 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 Spirit Of America 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 has no effect on the direction of Spirit Of i.e., Spirit Of and Power REIT go up and down completely randomly.

Pair Corralation between Spirit Of and Power REIT

Assuming the 90 days horizon Spirit Of is expected to generate 4.3 times less return on investment than Power REIT. But when comparing it to its historical volatility, Spirit Of America is 9.3 times less risky than Power REIT. It trades about 0.04 of its potential returns per unit of risk. Power REIT is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  397.00  in Power REIT on September 15, 2024 and sell it today you would lose (273.00) from holding Power REIT or give up 68.77% of portfolio value over 90 days.

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

Spirit Of America  vs.  Power REIT

Spirit Of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirit Of America has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Spirit Of is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Power REIT

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Spirit Of and Power REIT

The main advantage of trading using opposite Spirit Of and Power REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Of 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 Spirit Of America and Power 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.