Correlation Between W P and GPT

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

Diversification Opportunities for W P and GPT

0.71

Correlation Coefficient

W P  GPT

Poor diversification

The 3 months correlation between WPY and GPT is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding W P Carey and GPT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT 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 GPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Group has no effect on the direction of W P i.e., W P and GPT go up and down completely randomly.

Pair Corralation between W P and GPT

Assuming the 90 days horizon W P Carey is expected to under-perform the GPT. But the stock apears to be less risky and, when comparing its historical volatility, W P Carey is 1.33 times less risky than GPT. The stock trades about -0.21 of its potential returns per unit of risk. The GPT Group is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  274.00  in GPT Group on September 22, 2024 and sell it today you would lose (9.00) from holding GPT Group or give up 3.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

W P Carey  vs.  GPT Group

W P Carey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W P Carey has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

GPT Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with W P and GPT

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

The idea behind W P Carey and GPT 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.