Correlation Between W P and Land Securities

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

By analyzing existing cross correlation between W P Carey and Land Securities Group, you can compare the effects of market volatilities on W P and Land Securities 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 W P with a short position of Land Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of W P and Land Securities.

Diversification Opportunities for W P and Land Securities

0.2

Correlation Coefficient

W P  Land Securities

Modest diversification

The 3 months correlation between WPC and Land is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding W P Carey and Land Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Land Securities Group and W P 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 W P Carey are associated (or correlated) with Land Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Land Securities Group has no effect on the direction of W P i.e., W P and Land Securities go up and down completely randomly.

Pair Corralation between W P and Land Securities

Considering the 90-day investment horizon W P Carey is expected to generate 0.57 times more return on investment than Land Securities. However, W P Carey is 1.75 times less risky than Land Securities. It trades about 0.2 of its potential returns per unit of risk. Land Securities Group is currently generating about 0.04 per unit of risk. If you would invest  5,395  in W P Carey on December 26, 2024 and sell it today you would earn a total of  895.00  from holding W P Carey or generate 16.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.25%
Values	Daily Returns

W P Carey  vs.  Land Securities Group

W P Carey

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in W P Carey are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, W P exhibited solid returns over the last few months and may actually be approaching a breakup point.

Land Securities Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Land Securities Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Land Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with W P and Land Securities

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

The idea behind W P Carey and Land Securities 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.