Correlation Between Plaza Retail and Saul Centers

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

By analyzing existing cross correlation between Plaza Retail REIT and Saul Centers, you can compare the effects of market volatilities on Plaza Retail and Saul Centers 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 Plaza Retail with a short position of Saul Centers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plaza Retail and Saul Centers.

Diversification Opportunities for Plaza Retail and Saul Centers

0.03

Correlation Coefficient

Plaza Retail  Saul Centers

Significant diversification

The 3 months correlation between Plaza and Saul is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Saul Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saul Centers and Plaza Retail 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 Plaza Retail REIT are associated (or correlated) with Saul Centers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saul Centers has no effect on the direction of Plaza Retail i.e., Plaza Retail and Saul Centers go up and down completely randomly.

Pair Corralation between Plaza Retail and Saul Centers

Assuming the 90 days horizon Plaza Retail REIT is expected to generate 2.85 times more return on investment than Saul Centers. However, Plaza Retail is 2.85 times more volatile than Saul Centers. It trades about 0.01 of its potential returns per unit of risk. Saul Centers is currently generating about 0.02 per unit of risk. If you would invest  319.00  in Plaza Retail REIT on September 14, 2024 and sell it today you would lose (49.00) from holding Plaza Retail REIT or give up 15.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	69.43%
Values	Daily Returns

Plaza Retail REIT  vs.  Saul Centers

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Plaza Retail is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Saul Centers

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Saul Centers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Saul Centers is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Plaza Retail and Saul Centers

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

The idea behind Plaza Retail REIT and Saul Centers 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.