Correlation Between Power REIT and Armada Hflr

Can any of the company-specific risk be diversified away by investing in both Power REIT and Armada Hflr 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 Power REIT and Armada Hflr into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Power REIT and Armada Hflr

-0.2

Correlation Coefficient

Power REIT  Armada Hflr

Good diversification

The 3 months correlation between Power and Armada is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Armada Hflr Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Hflr Pr and Power REIT 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 Power REIT are associated (or correlated) with Armada Hflr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Hflr Pr has no effect on the direction of Power REIT i.e., Power REIT and Armada Hflr go up and down completely randomly.

Pair Corralation between Power REIT and Armada Hflr

Allowing for the 90-day total investment horizon Power REIT is expected to generate 14.38 times more return on investment than Armada Hflr. However, Power REIT is 14.38 times more volatile than Armada Hflr Pr. It trades about 0.11 of its potential returns per unit of risk. Armada Hflr Pr is currently generating about -0.07 per unit of risk. If you would invest  70.00  in Power REIT on September 26, 2024 and sell it today you would earn a total of  54.00  from holding Power REIT or generate 77.14% return on investment over 90 days.

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

Power REIT  vs.  Armada Hflr Pr

Power REIT

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT showed solid returns over the last few months and may actually be approaching a breakup point.

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Armada Hflr is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Power REIT and Armada Hflr

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

The idea behind Power REIT and Armada Hflr Pr 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.