Correlation Between Power REIT and EastGroup Properties

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

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

Diversification Opportunities for Power REIT and EastGroup Properties

-0.37

Correlation Coefficient

Power REIT  EastGroup Properties

Very good diversification

The 3 months correlation between Power and EastGroup is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties 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 EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of Power REIT i.e., Power REIT and EastGroup Properties go up and down completely randomly.

Pair Corralation between Power REIT and EastGroup Properties

Allowing for the 90-day total investment horizon Power REIT is expected to generate 9.92 times more return on investment than EastGroup Properties. However, Power REIT is 9.92 times more volatile than EastGroup Properties. It trades about 0.07 of its potential returns per unit of risk. EastGroup Properties is currently generating about -0.03 per unit of risk. If you would invest  67.00  in Power REIT on September 25, 2024 and sell it today you would earn a total of  56.00  from holding Power REIT or generate 83.58% 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.  EastGroup Properties

Power REIT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 8 (%) 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.

EastGroup Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EastGroup Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Power REIT and EastGroup Properties

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

The idea behind Power REIT and EastGroup Properties 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.