Correlation Between Federal Realty and Agree Realty

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

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

Diversification Opportunities for Federal Realty and Agree Realty

0.81

Correlation Coefficient

Federal Realty  Agree Realty

Very poor diversification

The 3 months correlation between Federal and Agree is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and Agree Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agree Realty and Federal Realty 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 Federal Realty Investment are associated (or correlated) with Agree Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agree Realty has no effect on the direction of Federal Realty i.e., Federal Realty and Agree Realty go up and down completely randomly.

Pair Corralation between Federal Realty and Agree Realty

Assuming the 90 days trading horizon Federal Realty Investment is expected to under-perform the Agree Realty. But the preferred stock apears to be less risky and, when comparing its historical volatility, Federal Realty Investment is 1.92 times less risky than Agree Realty. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Agree Realty is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,964  in Agree Realty on September 12, 2024 and sell it today you would earn a total of  5.00  from holding Agree Realty or generate 0.25% return on investment over 90 days.

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

Federal Realty Investment  vs.  Agree Realty

Federal Realty Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Realty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Federal Realty is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Agree Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agree Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Agree Realty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federal Realty and Agree Realty

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

The idea behind Federal Realty Investment and Agree Realty 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.