Correlation Between Retail Estates and Vastned Retail

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

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

Diversification Opportunities for Retail Estates and Vastned Retail

0.5

Correlation Coefficient

Retail Estates  Vastned Retail

Very weak diversification

The 3 months correlation between Retail and Vastned is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates and Vastned Retail Belgium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vastned Retail Belgium and Retail Estates 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 Retail Estates are associated (or correlated) with Vastned Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vastned Retail Belgium has no effect on the direction of Retail Estates i.e., Retail Estates and Vastned Retail go up and down completely randomly.

Pair Corralation between Retail Estates and Vastned Retail

Assuming the 90 days trading horizon Retail Estates is expected to under-perform the Vastned Retail. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates is 1.19 times less risky than Vastned Retail. The stock trades about -0.12 of its potential returns per unit of risk. The Vastned Retail Belgium is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,931  in Vastned Retail Belgium on August 30, 2024 and sell it today you would lose (121.00) from holding Vastned Retail Belgium or give up 4.13% of portfolio value over 90 days.

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

Retail Estates   vs.  Vastned Retail Belgium

Retail Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Vastned Retail Belgium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vastned Retail Belgium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Vastned Retail is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Retail Estates and Vastned Retail

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

The idea behind Retail Estates and Vastned Retail Belgium 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.