Correlation Between Power REIT and Carlyle

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

By analyzing existing cross correlation between Power REIT and Carlyle Group, you can compare the effects of market volatilities on Power REIT and Carlyle 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 Carlyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power REIT and Carlyle.

Diversification Opportunities for Power REIT and Carlyle

0.07

Correlation Coefficient

Power REIT  Carlyle

Significant diversification

The 3 months correlation between Power and Carlyle is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group 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 Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Power REIT i.e., Power REIT and Carlyle go up and down completely randomly.

Pair Corralation between Power REIT and Carlyle

Allowing for the 90-day total investment horizon Power REIT is expected to generate 1.85 times more return on investment than Carlyle. However, Power REIT is 1.85 times more volatile than Carlyle Group. It trades about 0.13 of its potential returns per unit of risk. Carlyle Group is currently generating about 0.14 per unit of risk. If you would invest  108.00  in Power REIT on September 2, 2024 and sell it today you would earn a total of  13.00  from holding Power REIT or generate 12.04% return on investment over 90 days.

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

Power REIT  vs.  Carlyle Group

Power REIT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 3 (%) 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.

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power REIT and Carlyle

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

The idea behind Power REIT and Carlyle Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .