Correlation Between Gentex and BTB Real
Can any of the company-specific risk be diversified away by investing in both Gentex and BTB Real 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 Gentex and BTB Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gentex and BTB Real Estate, you can compare the effects of market volatilities on Gentex and BTB Real 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 Gentex with a short position of BTB Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentex and BTB Real.
Diversification Opportunities for Gentex and BTB Real
Good diversification
The 3 months correlation between Gentex and BTB is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and BTB Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTB Real Estate and Gentex 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 Gentex are associated (or correlated) with BTB Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTB Real Estate has no effect on the direction of Gentex i.e., Gentex and BTB Real go up and down completely randomly.
Pair Corralation between Gentex and BTB Real
Given the investment horizon of 90 days Gentex is expected to generate 5.3 times less return on investment than BTB Real. But when comparing it to its historical volatility, Gentex is 4.86 times less risky than BTB Real. It trades about 0.03 of its potential returns per unit of risk. BTB Real Estate is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 277.00 in BTB Real Estate on September 2, 2024 and sell it today you would lose (20.00) from holding BTB Real Estate or give up 7.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.04% |
| Values | Daily Returns |
Gentex vs. BTB Real Estate
Performance |
| Timeline |
| Gentex |
| BTB Real Estate |
Gentex and BTB Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gentex and BTB Real
The main advantage of trading using opposite Gentex and BTB Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex position performs unexpectedly, BTB Real 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 BTB Real will offset losses from the drop in BTB Real's long position.The idea behind Gentex and BTB Real Estate 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.| BTB Real vs. Boston Properties | BTB Real vs. Kilroy Realty Corp | BTB Real vs. SL Green Realty | BTB Real vs. Vornado Realty Trust |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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