Correlation Between North American and Slate Grocery

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

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

Diversification Opportunities for North American and Slate Grocery

0.14

Correlation Coefficient

North American  Slate Grocery

Average diversification

The 3 months correlation between North and Slate is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Slate Grocery REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Slate Grocery REIT and North American 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 North American Financial are associated (or correlated) with Slate Grocery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Slate Grocery REIT has no effect on the direction of North American i.e., North American and Slate Grocery go up and down completely randomly.

Pair Corralation between North American and Slate Grocery

Assuming the 90 days trading horizon North American Financial is expected to generate 1.18 times more return on investment than Slate Grocery. However, North American is 1.18 times more volatile than Slate Grocery REIT. It trades about 0.21 of its potential returns per unit of risk. Slate Grocery REIT is currently generating about -0.07 per unit of risk. If you would invest  570.00  in North American Financial on September 23, 2024 and sell it today you would earn a total of  131.00  from holding North American Financial or generate 22.98% return on investment over 90 days.

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

North American Financial  vs.  Slate Grocery REIT

North American Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American displayed solid returns over the last few months and may actually be approaching a breakup point.

Slate Grocery REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with North American and Slate Grocery

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

The idea behind North American Financial and Slate Grocery 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.