Correlation Between Power REIT and Real Estate
Can any of the company-specific risk be diversified away by investing in both Power REIT and Real Estate 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 Power REIT and Real Estate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power REIT and Real Estate Securities, you can compare the effects of market volatilities on Power REIT and Real Estate 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 Power REIT with a short position of Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power REIT and Real Estate.
Diversification Opportunities for Power REIT and Real Estate
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Power and Real is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities and Power REIT 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 Power REIT are associated (or correlated) with Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of Power REIT i.e., Power REIT and Real Estate go up and down completely randomly.
Pair Corralation between Power REIT and Real Estate
Allowing for the 90-day total investment horizon Power REIT is expected to under-perform the Real Estate. In addition to that, Power REIT is 4.47 times more volatile than Real Estate Securities. It trades about -0.05 of its total potential returns per unit of risk. Real Estate Securities is currently generating about 0.03 per unit of volatility. If you would invest 3,057 in Real Estate Securities on August 28, 2024 and sell it today you would earn a total of 16.00 from holding Real Estate Securities or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power REIT vs. Real Estate Securities
Performance |
| Timeline |
| Power REIT |
| Real Estate Securities |
Power REIT and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power REIT and Real Estate
The main advantage of trading using opposite Power REIT and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.| Power REIT vs. Broadstone Net Lease | Power REIT vs. Armada Hflr Pr | Power REIT vs. Brightspire Capital | Power REIT vs. Safehold |
| Real Estate vs. Realty Income | Real Estate vs. Dynex Capital | Real Estate vs. First Industrial Realty | Real Estate vs. Healthcare 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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