Correlation Between W P and Stockland

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

Diversification Opportunities for W P and Stockland

0.38

Correlation Coefficient

W P  Stockland

Weak diversification

The 3 months correlation between WPY and Stockland is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding W P Carey and Stockland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stockland 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 Stockland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stockland has no effect on the direction of W P i.e., W P and Stockland go up and down completely randomly.

Pair Corralation between W P and Stockland

Assuming the 90 days horizon W P Carey is expected to generate 0.63 times more return on investment than Stockland. However, W P Carey is 1.59 times less risky than Stockland. It trades about 0.07 of its potential returns per unit of risk. Stockland is currently generating about -0.01 per unit of risk. If you would invest  5,442  in W P Carey on December 10, 2024 and sell it today you would earn a total of  524.00  from holding W P Carey or generate 9.63% return on investment over 90 days.

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

W P Carey  vs.  Stockland

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. Despite nearly fragile basic indicators, W P reported solid returns over the last few months and may actually be approaching a breakup point.

Stockland

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stockland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Stockland 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 Stockland

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

The idea behind W P Carey and Stockland 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.