Correlation Between Waters and Regency Centers

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

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

Diversification Opportunities for Waters and Regency Centers

0.03

Correlation Coefficient

Waters  Regency Centers

Significant diversification

The 3 months correlation between Waters and Regency is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Regency Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regency Centers and Waters 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 Waters are associated (or correlated) with Regency Centers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regency Centers has no effect on the direction of Waters i.e., Waters and Regency Centers go up and down completely randomly.

Pair Corralation between Waters and Regency Centers

Considering the 90-day investment horizon Waters is expected to generate 2.0 times more return on investment than Regency Centers. However, Waters is 2.0 times more volatile than Regency Centers. It trades about 0.03 of its potential returns per unit of risk. Regency Centers is currently generating about 0.02 per unit of risk. If you would invest  30,634  in Waters on December 2, 2024 and sell it today you would earn a total of  7,100  from holding Waters or generate 23.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.37%
Values	Daily Returns

Waters  vs.  Regency Centers

Waters

Risk-Adjusted Performance

Very Weak

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

Regency Centers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regency Centers has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Regency Centers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Waters and Regency Centers

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

The idea behind Waters and Regency Centers 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.