Correlation Between Real Estate and IShares Core

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

Diversification Opportunities for Real Estate and IShares Core

0.94

Correlation Coefficient

Real Estate  IShares Core

Almost no diversification

The 3 months correlation between Real and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding The Real Estate and iShares Core REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core REIT 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core REIT has no effect on the direction of Real Estate i.e., Real Estate and IShares Core go up and down completely randomly.

Pair Corralation between Real Estate and IShares Core

Given the investment horizon of 90 days The Real Estate is expected to generate 0.99 times more return on investment than IShares Core. However, The Real Estate is 1.01 times less risky than IShares Core. It trades about 0.06 of its potential returns per unit of risk. iShares Core REIT is currently generating about 0.02 per unit of risk. If you would invest  4,009  in The Real Estate on December 28, 2024 and sell it today you would earn a total of  132.00  from holding The Real Estate or generate 3.29% return on investment over 90 days.

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

The Real Estate  vs.  iShares Core REIT

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Core REIT

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core REIT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Real Estate and IShares Core

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

The idea behind The Real Estate and iShares Core REIT 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.