Correlation Between Warehouses and Retail Estates

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

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

Diversification Opportunities for Warehouses and Retail Estates

0.19

Correlation Coefficient

Warehouses  Retail Estates

Average diversification

The 3 months correlation between Warehouses and Retail is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Warehouses de Pauw and Retail Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates and Warehouses 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 Warehouses de Pauw are associated (or correlated) with Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates has no effect on the direction of Warehouses i.e., Warehouses and Retail Estates go up and down completely randomly.

Pair Corralation between Warehouses and Retail Estates

Assuming the 90 days trading horizon Warehouses de Pauw is expected to under-perform the Retail Estates. In addition to that, Warehouses is 1.2 times more volatile than Retail Estates . It trades about -0.03 of its total potential returns per unit of risk. Retail Estates is currently generating about -0.01 per unit of volatility. If you would invest  6,274  in Retail Estates on November 19, 2024 and sell it today you would lose (534.00) from holding Retail Estates or give up 8.51% of portfolio value over 90 days.

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

Warehouses de Pauw  vs.  Retail Estates

Warehouses de Pauw

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Warehouses de Pauw are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Warehouses is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Retail Estates

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Warehouses and Retail Estates

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

The idea behind Warehouses de Pauw and Retail Estates 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.