Correlation Between Timken and Postal Realty
Can any of the company-specific risk be diversified away by investing in both Timken and Postal Realty 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 Timken and Postal Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and Postal Realty Trust, you can compare the effects of market volatilities on Timken and Postal Realty 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 Timken with a short position of Postal Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Postal Realty.
Diversification Opportunities for Timken and Postal Realty
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Timken and Postal is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Postal Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Realty Trust and Timken 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 Timken Company are associated (or correlated) with Postal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Realty Trust has no effect on the direction of Timken i.e., Timken and Postal Realty go up and down completely randomly.
Pair Corralation between Timken and Postal Realty
Considering the 90-day investment horizon Timken Company is expected to under-perform the Postal Realty. In addition to that, Timken is 3.15 times more volatile than Postal Realty Trust. It trades about -0.07 of its total potential returns per unit of risk. Postal Realty Trust is currently generating about 0.03 per unit of volatility. If you would invest 1,408 in Postal Realty Trust on September 2, 2024 and sell it today you would earn a total of 9.00 from holding Postal Realty Trust or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Timken Company vs. Postal Realty Trust
Performance |
| Timeline |
| Timken Company |
| Postal Realty Trust |
Timken and Postal Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and Postal Realty
The main advantage of trading using opposite Timken and Postal Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Postal Realty 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 Postal Realty will offset losses from the drop in Postal Realty's long position.The idea behind Timken Company and Postal Realty Trust 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.| Postal Realty vs. Office Properties Income | Postal Realty vs. Boston Properties | Postal Realty vs. SL Green Realty | Postal Realty vs. Alexandria Real Estate |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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