Correlation Between Urban Edge and Real Estate

Can any of the company-specific risk be diversified away by investing in both Urban Edge and Real Estate 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 Real Estate 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 Real Estate Securities, you can compare the effects of market volatilities on Urban Edge and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Edge and Real Estate.

Diversification Opportunities for Urban Edge and Real Estate

-0.37

Correlation Coefficient

Urban Edge  Real Estate

Very good diversification

The 3 months correlation between Urban and Real is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of Urban Edge i.e., Urban Edge and Real Estate go up and down completely randomly.

Pair Corralation between Urban Edge and Real Estate

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to generate 1.4 times more return on investment than Real Estate. However, Urban Edge is 1.4 times more volatile than Real Estate Securities. It trades about 0.08 of its potential returns per unit of risk. Real Estate Securities is currently generating about 0.05 per unit of risk. If you would invest  1,289  in Urban Edge Properties on September 18, 2024 and sell it today you would earn a total of  978.00  from holding Urban Edge Properties or generate 75.87% return on investment over 90 days.

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

Urban Edge Properties  vs.  Real Estate Securities

Urban Edge Properties

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Edge Properties are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Urban Edge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Real Estate Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Urban Edge and Real Estate

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

The idea behind Urban Edge Properties and Real Estate Securities 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.