Correlation Between Definity Financial and Plaza Retail

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

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

Diversification Opportunities for Definity Financial and Plaza Retail

-0.68

Correlation Coefficient

Definity Financial  Plaza Retail

Excellent diversification

The 3 months correlation between Definity and Plaza is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp and Plaza Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Retail REIT and Definity Financial 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 Definity Financial Corp are associated (or correlated) with Plaza Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Retail REIT has no effect on the direction of Definity Financial i.e., Definity Financial and Plaza Retail go up and down completely randomly.

Pair Corralation between Definity Financial and Plaza Retail

Assuming the 90 days trading horizon Definity Financial Corp is expected to generate 1.85 times more return on investment than Plaza Retail. However, Definity Financial is 1.85 times more volatile than Plaza Retail REIT. It trades about 0.1 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about -0.19 per unit of risk. If you would invest  5,321  in Definity Financial Corp on September 23, 2024 and sell it today you would earn a total of  418.00  from holding Definity Financial Corp or generate 7.86% return on investment over 90 days.

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

Definity Financial Corp  vs.  Plaza Retail REIT

Definity Financial Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Definity Financial Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Definity Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 Definity Financial and Plaza Retail

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

The idea behind Definity Financial Corp and Plaza Retail 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.