Correlation Between Melcor Developments and Smart REIT
Can any of the company-specific risk be diversified away by investing in both Melcor Developments and Smart REIT 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 Melcor Developments and Smart REIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melcor Developments and Smart REIT, you can compare the effects of market volatilities on Melcor Developments and Smart REIT 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 Melcor Developments with a short position of Smart REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melcor Developments and Smart REIT.
Diversification Opportunities for Melcor Developments and Smart REIT
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Melcor and Smart is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Melcor Developments and Smart REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart REIT and Melcor Developments 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 Melcor Developments are associated (or correlated) with Smart REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart REIT has no effect on the direction of Melcor Developments i.e., Melcor Developments and Smart REIT go up and down completely randomly.
Pair Corralation between Melcor Developments and Smart REIT
Assuming the 90 days horizon Melcor Developments is expected to under-perform the Smart REIT. But the pink sheet apears to be less risky and, when comparing its historical volatility, Melcor Developments is 1.04 times less risky than Smart REIT. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Smart REIT is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,833 in Smart REIT on August 28, 2024 and sell it today you would earn a total of 12.00 from holding Smart REIT or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melcor Developments vs. Smart REIT
Performance |
| Timeline |
| Melcor Developments |
| Smart REIT |
Melcor Developments and Smart REIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melcor Developments and Smart REIT
The main advantage of trading using opposite Melcor Developments and Smart REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melcor Developments position performs unexpectedly, Smart REIT 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 Smart REIT will offset losses from the drop in Smart REIT's long position.| Melcor Developments vs. Smart REIT | Melcor Developments vs. Phillips Edison Co | Melcor Developments vs. Simon Property Group | Melcor Developments vs. Inventrust Properties Corp |
| Smart REIT vs. Phillips Edison Co | Smart REIT vs. Simon Property Group | Smart REIT vs. Inventrust Properties Corp | Smart REIT vs. Site Centers Corp |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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