Correlation Between Real Estate and IShares Residential

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

Diversification Opportunities for Real Estate and IShares Residential

0.81

Correlation Coefficient

Real Estate  IShares Residential

Very poor diversification

The 3 months correlation between Real and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Real Estate and iShares Residential and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Residential and 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 IShares Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Residential and has no effect on the direction of Real Estate i.e., Real Estate and IShares Residential go up and down completely randomly.

Pair Corralation between Real Estate and IShares Residential

Given the investment horizon of 90 days Real Estate is expected to generate 1.87 times less return on investment than IShares Residential. But when comparing it to its historical volatility, The Real Estate is 1.05 times less risky than IShares Residential. It trades about 0.06 of its potential returns per unit of risk. iShares Residential and is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,977  in iShares Residential and on December 28, 2024 and sell it today you would earn a total of  529.00  from holding iShares Residential and or generate 6.63% return on investment over 90 days.

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

The Real Estate  vs.  iShares Residential and

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 4 (%) 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.

iShares Residential and

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Residential and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, IShares Residential may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Real Estate and IShares Residential

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

The idea behind The Real Estate and iShares Residential and 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.