Correlation Between BSR Real and Canadian Apartment

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

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

Diversification Opportunities for BSR Real and Canadian Apartment

0.76

Correlation Coefficient

BSR Real  Canadian Apartment

Poor diversification

The 3 months correlation between BSR and Canadian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BSR Real Estate and Canadian Apartment Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Apartment and BSR Real 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 BSR Real Estate are associated (or correlated) with Canadian Apartment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Apartment has no effect on the direction of BSR Real i.e., BSR Real and Canadian Apartment go up and down completely randomly.

Pair Corralation between BSR Real and Canadian Apartment

Assuming the 90 days trading horizon BSR Real Estate is expected to generate 0.97 times more return on investment than Canadian Apartment. However, BSR Real Estate is 1.03 times less risky than Canadian Apartment. It trades about -0.06 of its potential returns per unit of risk. Canadian Apartment Properties is currently generating about -0.34 per unit of risk. If you would invest  1,939  in BSR Real Estate on September 16, 2024 and sell it today you would lose (91.00) from holding BSR Real Estate or give up 4.69% of portfolio value over 90 days.

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

BSR Real Estate  vs.  Canadian Apartment Properties

BSR Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Canadian Apartment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Apartment Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BSR Real and Canadian Apartment

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

The idea behind BSR Real Estate and Canadian Apartment Properties 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.