Correlation Between Real Estate and IREIT MarketVector

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

By analyzing existing cross correlation between The Real Estate and iREIT MarketVector, you can compare the effects of market volatilities on Real Estate and IREIT MarketVector 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 Real Estate with a short position of IREIT MarketVector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and IREIT MarketVector.

Diversification Opportunities for Real Estate and IREIT MarketVector

0.77

Correlation Coefficient

Real Estate  IREIT MarketVector

Poor diversification

The 3 months correlation between Real and IREIT is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Real Estate and iREIT MarketVector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iREIT MarketVector and Real Estate 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 The Real Estate are associated (or correlated) with IREIT MarketVector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iREIT MarketVector has no effect on the direction of Real Estate i.e., Real Estate and IREIT MarketVector go up and down completely randomly.

Pair Corralation between Real Estate and IREIT MarketVector

Given the investment horizon of 90 days The Real Estate is expected to generate 1.04 times more return on investment than IREIT MarketVector. However, Real Estate is 1.04 times more volatile than iREIT MarketVector. It trades about 0.05 of its potential returns per unit of risk. iREIT MarketVector is currently generating about 0.0 per unit of risk. If you would invest  4,028  in The Real Estate on December 27, 2024 and sell it today you would earn a total of  114.00  from holding The Real Estate or generate 2.83% return on investment over 90 days.

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

The Real Estate  vs.  iREIT MarketVector

Real Estate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Real Estate is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iREIT MarketVector

Risk-Adjusted Performance

Very Weak

Over the last 90 days iREIT MarketVector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, IREIT MarketVector is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Real Estate and IREIT MarketVector

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

The idea behind The Real Estate and iREIT MarketVector 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.