Correlation Between Japan Real and Alstria Office

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

By analyzing existing cross correlation between Japan Real Estate and alstria office REIT AG, you can compare the effects of market volatilities on Japan Real and Alstria Office 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 Japan Real with a short position of Alstria Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Real and Alstria Office.

Diversification Opportunities for Japan Real and Alstria Office

-0.67

Correlation Coefficient

Japan Real  Alstria Office

Excellent diversification

The 3 months correlation between Japan and Alstria is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Japan Real Estate and alstria office REIT AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on alstria office REIT and Japan 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 Japan Real Estate are associated (or correlated) with Alstria Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of alstria office REIT has no effect on the direction of Japan Real i.e., Japan Real and Alstria Office go up and down completely randomly.

Pair Corralation between Japan Real and Alstria Office

Assuming the 90 days horizon Japan Real Estate is expected to under-perform the Alstria Office. But the stock apears to be less risky and, when comparing its historical volatility, Japan Real Estate is 1.91 times less risky than Alstria Office. The stock trades about -0.16 of its potential returns per unit of risk. The alstria office REIT AG is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  566.00  in alstria office REIT AG on September 19, 2024 and sell it today you would earn a total of  198.00  from holding alstria office REIT AG or generate 34.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Japan Real Estate  vs.  alstria office REIT AG

Japan Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

alstria office REIT

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in alstria office REIT AG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alstria Office reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Real and Alstria Office

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

The idea behind Japan Real Estate and alstria office REIT AG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.