Correlation Between National Retail and AEON STORES

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

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

Diversification Opportunities for National Retail and AEON STORES

0.09

Correlation Coefficient

National Retail  AEON STORES

Significant diversification

The 3 months correlation between National and AEON is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and AEON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON STORES and National Retail 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 National Retail Properties are associated (or correlated) with AEON STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON STORES has no effect on the direction of National Retail i.e., National Retail and AEON STORES go up and down completely randomly.

Pair Corralation between National Retail and AEON STORES

Assuming the 90 days trading horizon National Retail Properties is expected to generate 4.57 times more return on investment than AEON STORES. However, National Retail is 4.57 times more volatile than AEON STORES. It trades about 0.0 of its potential returns per unit of risk. AEON STORES is currently generating about -0.22 per unit of risk. If you would invest  4,214  in National Retail Properties on September 3, 2024 and sell it today you would lose (16.00) from holding National Retail Properties or give up 0.38% of portfolio value over 90 days.

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

National Retail Properties  vs.  AEON STORES

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AEON STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AEON STORES is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with National Retail and AEON STORES

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

The idea behind National Retail Properties and AEON STORES 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.