Correlation Between Impact Growth and Quality Houses

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

By analyzing existing cross correlation between Impact Growth REIT and Quality Houses Property, you can compare the effects of market volatilities on Impact Growth and Quality Houses 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 Impact Growth with a short position of Quality Houses. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impact Growth and Quality Houses.

Diversification Opportunities for Impact Growth and Quality Houses

-0.3

Correlation Coefficient

Impact Growth  Quality Houses

Very good diversification

The 3 months correlation between Impact and Quality is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Impact Growth REIT and Quality Houses Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Houses Property and Impact Growth 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 Impact Growth REIT are associated (or correlated) with Quality Houses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Houses Property has no effect on the direction of Impact Growth i.e., Impact Growth and Quality Houses go up and down completely randomly.

Pair Corralation between Impact Growth and Quality Houses

Assuming the 90 days trading horizon Impact Growth REIT is expected to under-perform the Quality Houses. But the stock apears to be less risky and, when comparing its historical volatility, Impact Growth REIT is 1.6 times less risky than Quality Houses. The stock trades about -0.08 of its potential returns per unit of risk. The Quality Houses Property is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  423.00  in Quality Houses Property on September 3, 2024 and sell it today you would earn a total of  51.00  from holding Quality Houses Property or generate 12.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Impact Growth REIT  vs.  Quality Houses Property

Impact Growth REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Quality Houses Property

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Houses Property are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite quite conflicting forward-looking signals, Quality Houses disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impact Growth and Quality Houses

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

The idea behind Impact Growth REIT and Quality Houses Property 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.