Correlation Between Urban Edge and Smart REIT

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

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

Diversification Opportunities for Urban Edge and Smart REIT

0.63

Correlation Coefficient

Urban Edge  Smart REIT

Poor diversification

The 3 months correlation between Urban and Smart is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Smart REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart REIT and Urban Edge 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 Urban Edge Properties 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 Urban Edge i.e., Urban Edge and Smart REIT go up and down completely randomly.

Pair Corralation between Urban Edge and Smart REIT

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to under-perform the Smart REIT. In addition to that, Urban Edge is 1.19 times more volatile than Smart REIT. It trades about -0.1 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  1,845  in Smart REIT on December 3, 2024 and sell it today you would lose (69.00) from holding Smart REIT or give up 3.74% of portfolio value over 90 days.

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

Urban Edge Properties  vs.  Smart REIT

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Edge Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Smart REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smart REIT has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Urban Edge and Smart REIT

The main advantage of trading using opposite Urban Edge and Smart REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Edge 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 Urban Edge Properties 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.