Correlation Between Supermarket Income and Unite Group

Can any of the company-specific risk be diversified away by investing in both Supermarket Income and Unite Group 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 Supermarket Income and Unite Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Supermarket Income REIT and Unite Group PLC, you can compare the effects of market volatilities on Supermarket Income and Unite Group 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 Supermarket Income with a short position of Unite Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Supermarket Income and Unite Group.

Diversification Opportunities for Supermarket Income and Unite Group

0.88

Correlation Coefficient

Supermarket Income  Unite Group

Very poor diversification

The 3 months correlation between Supermarket and Unite is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Supermarket Income REIT and Unite Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unite Group PLC and Supermarket Income 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 Supermarket Income REIT are associated (or correlated) with Unite Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unite Group PLC has no effect on the direction of Supermarket Income i.e., Supermarket Income and Unite Group go up and down completely randomly.

Pair Corralation between Supermarket Income and Unite Group

Assuming the 90 days trading horizon Supermarket Income REIT is expected to generate 0.93 times more return on investment than Unite Group. However, Supermarket Income REIT is 1.08 times less risky than Unite Group. It trades about -0.04 of its potential returns per unit of risk. Unite Group PLC is currently generating about -0.11 per unit of risk. If you would invest  7,180  in Supermarket Income REIT on October 20, 2024 and sell it today you would lose (210.00) from holding Supermarket Income REIT or give up 2.92% of portfolio value over 90 days.

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

Supermarket Income REIT  vs.  Unite Group PLC

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Unite Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unite Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Supermarket Income and Unite Group

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

The idea behind Supermarket Income REIT and Unite Group PLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.