Correlation Between Plaza Retail and Smart REIT

Can any of the company-specific risk be diversified away by investing in both Plaza Retail and Smart REIT 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 Smart REIT 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 Smart REIT, you can compare the effects of market volatilities on Plaza Retail and Smart REIT 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 Smart REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plaza Retail and Smart REIT.

Diversification Opportunities for Plaza Retail and Smart REIT

0.49

Correlation Coefficient

Plaza Retail  Smart REIT

Very weak diversification

The 3 months correlation between Plaza and Smart is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Smart REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart REIT 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 Smart REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart REIT has no effect on the direction of Plaza Retail i.e., Plaza Retail and Smart REIT go up and down completely randomly.

Pair Corralation between Plaza Retail and Smart REIT

Assuming the 90 days horizon Plaza Retail REIT is expected to generate 0.27 times more return on investment than Smart REIT. However, Plaza Retail REIT is 3.66 times less risky than Smart REIT. It trades about -0.07 of its potential returns per unit of risk. Smart REIT is currently generating about -0.04 per unit of risk. If you would invest  280.00  in Plaza Retail REIT on September 14, 2024 and sell it today you would lose (10.00) from holding Plaza Retail REIT or give up 3.57% of portfolio value over 90 days.

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

Plaza Retail REIT  vs.  Smart REIT

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.

Smart REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with Plaza Retail and Smart REIT

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

The idea behind Plaza Retail REIT and Smart REIT 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.