Correlation Between Vornado Realty and Carlyle

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

By analyzing existing cross correlation between Vornado Realty Trust and The Carlyle Group, you can compare the effects of market volatilities on Vornado Realty and Carlyle 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 Vornado Realty with a short position of Carlyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vornado Realty and Carlyle.

Diversification Opportunities for Vornado Realty and Carlyle

0.73

Correlation Coefficient

Vornado Realty  Carlyle

Poor diversification

The 3 months correlation between Vornado and Carlyle is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vornado Realty Trust and The Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group and Vornado Realty 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 Vornado Realty Trust are associated (or correlated) with Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Vornado Realty i.e., Vornado Realty and Carlyle go up and down completely randomly.

Pair Corralation between Vornado Realty and Carlyle

Assuming the 90 days trading horizon Vornado Realty Trust is expected to generate 1.02 times more return on investment than Carlyle. However, Vornado Realty is 1.02 times more volatile than The Carlyle Group. It trades about -0.12 of its potential returns per unit of risk. The Carlyle Group is currently generating about -0.3 per unit of risk. If you would invest  1,589  in Vornado Realty Trust on September 24, 2024 and sell it today you would lose (41.00) from holding Vornado Realty Trust or give up 2.58% of portfolio value over 90 days.

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

Vornado Realty Trust  vs.  The Carlyle Group

Vornado Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vornado Realty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Carlyle Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Vornado Realty and Carlyle

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

The idea behind Vornado Realty Trust and The Carlyle Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.