Correlation Between Carlyle and Power REIT

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

By analyzing existing cross correlation between Carlyle Group and Power REIT, you can compare the effects of market volatilities on Carlyle and Power 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 Carlyle with a short position of Power REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and Power REIT.

Diversification Opportunities for Carlyle and Power REIT

0.13

Correlation Coefficient

Carlyle  Power REIT

Average diversification

The 3 months correlation between Carlyle and Power is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT and Carlyle 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 Carlyle Group are associated (or correlated) with Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT has no effect on the direction of Carlyle i.e., Carlyle and Power REIT go up and down completely randomly.

Pair Corralation between Carlyle and Power REIT

Allowing for the 90-day total investment horizon Carlyle is expected to generate 5.47 times less return on investment than Power REIT. But when comparing it to its historical volatility, Carlyle Group is 5.39 times less risky than Power REIT. It trades about 0.08 of its potential returns per unit of risk. Power REIT is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Power REIT on September 4, 2024 and sell it today you would earn a total of  97.00  from holding Power REIT or generate 176.36% return on investment over 90 days.

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

Carlyle Group  vs.  Power REIT

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Power REIT

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and Power REIT

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

The idea behind Carlyle Group and Power REIT 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.