Correlation Between Boardwalk Real and Canadian Apartment

Can any of the company-specific risk be diversified away by investing in both Boardwalk Real and Canadian Apartment 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 Boardwalk Real and Canadian Apartment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boardwalk Real Estate and Canadian Apartment Properties, you can compare the effects of market volatilities on Boardwalk Real and Canadian Apartment 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 Boardwalk Real with a short position of Canadian Apartment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boardwalk Real and Canadian Apartment.

Diversification Opportunities for Boardwalk Real and Canadian Apartment

0.98

Correlation Coefficient

Boardwalk Real  Canadian Apartment

Almost no diversification

The 3 months correlation between Boardwalk and Canadian is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Boardwalk Real Estate and Canadian Apartment Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Apartment and Boardwalk Real 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 Boardwalk Real Estate are associated (or correlated) with Canadian Apartment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Apartment has no effect on the direction of Boardwalk Real i.e., Boardwalk Real and Canadian Apartment go up and down completely randomly.

Pair Corralation between Boardwalk Real and Canadian Apartment

Assuming the 90 days trading horizon Boardwalk Real Estate is expected to under-perform the Canadian Apartment. But the stock apears to be less risky and, when comparing its historical volatility, Boardwalk Real Estate is 1.06 times less risky than Canadian Apartment. The stock trades about -0.23 of its potential returns per unit of risk. The Canadian Apartment Properties is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  5,225  in Canadian Apartment Properties on September 2, 2024 and sell it today you would lose (640.00) from holding Canadian Apartment Properties or give up 12.25% of portfolio value over 90 days.

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

Boardwalk Real Estate  vs.  Canadian Apartment Properties

Boardwalk Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boardwalk Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Canadian Apartment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Apartment Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Boardwalk Real and Canadian Apartment

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

The idea behind Boardwalk Real Estate and Canadian Apartment Properties 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.