Correlation Between W P and Tanger Factory

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Can any of the company-specific risk be diversified away by investing in both W P and Tanger Factory 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 Tanger Factory 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 Tanger Factory Outlet, you can compare the effects of market volatilities on W P and Tanger Factory 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 Tanger Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of W P and Tanger Factory.

Diversification Opportunities for W P and Tanger Factory

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between WPC and Tanger is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding W P Carey and Tanger Factory Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanger Factory Outlet 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 Tanger Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanger Factory Outlet has no effect on the direction of W P i.e., W P and Tanger Factory go up and down completely randomly.

Pair Corralation between W P and Tanger Factory

Considering the 90-day investment horizon W P is expected to generate 3.08 times less return on investment than Tanger Factory. But when comparing it to its historical volatility, W P Carey is 1.24 times less risky than Tanger Factory. It trades about 0.18 of its potential returns per unit of risk. Tanger Factory Outlet is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  3,319  in Tanger Factory Outlet on September 2, 2024 and sell it today you would earn a total of  378.00  from holding Tanger Factory Outlet or generate 11.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

W P Carey  vs.  Tanger Factory Outlet

 Performance 
       Timeline  
W P Carey 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days W P Carey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, W P is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Tanger Factory Outlet 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Tanger Factory Outlet are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Tanger Factory unveiled solid returns over the last few months and may actually be approaching a breakup point.

W P and Tanger Factory Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with W P and Tanger Factory

The main advantage of trading using opposite W P and Tanger Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if W P position performs unexpectedly, Tanger Factory 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 Tanger Factory will offset losses from the drop in Tanger Factory's long position.
The idea behind W P Carey and Tanger Factory Outlet 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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