Correlation Between Smart REIT and Choice Properties

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

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

Diversification Opportunities for Smart REIT and Choice Properties

0.7

Correlation Coefficient

Smart REIT  Choice Properties

Poor diversification

The 3 months correlation between Smart and Choice is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Smart REIT and Choice Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Properties Real and Smart 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 Smart REIT are associated (or correlated) with Choice Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Properties Real has no effect on the direction of Smart REIT i.e., Smart REIT and Choice Properties go up and down completely randomly.

Pair Corralation between Smart REIT and Choice Properties

Assuming the 90 days horizon Smart REIT is expected to generate 2.5 times more return on investment than Choice Properties. However, Smart REIT is 2.5 times more volatile than Choice Properties Real. It trades about -0.04 of its potential returns per unit of risk. Choice Properties Real is currently generating about -0.14 per unit of risk. If you would invest  1,971  in Smart REIT on September 14, 2024 and sell it today you would lose (180.00) from holding Smart REIT or give up 9.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Smart REIT  vs.  Choice Properties Real

Smart REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Choice Properties Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Smart REIT and Choice Properties

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

The idea behind Smart REIT and Choice Properties Real 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.