Correlation Between Slate Grocery and Western Investment

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

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

Diversification Opportunities for Slate Grocery and Western Investment

-0.03

Correlation Coefficient

Slate Grocery  Western Investment

Good diversification

The 3 months correlation between Slate and Western is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Slate Grocery REIT and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Slate Grocery 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 Slate Grocery REIT are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Slate Grocery i.e., Slate Grocery and Western Investment go up and down completely randomly.

Pair Corralation between Slate Grocery and Western Investment

Assuming the 90 days trading horizon Slate Grocery REIT is expected to under-perform the Western Investment. But the stock apears to be less risky and, when comparing its historical volatility, Slate Grocery REIT is 1.91 times less risky than Western Investment. The stock trades about -0.39 of its potential returns per unit of risk. The Western Investment is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Western Investment on October 1, 2024 and sell it today you would earn a total of  11.00  from holding Western Investment or generate 25.0% return on investment over 90 days.

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

Slate Grocery REIT  vs.  Western Investment

Slate Grocery REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Slate Grocery REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Western Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Slate Grocery and Western Investment

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

The idea behind Slate Grocery REIT and Western Investment 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.

Check out your portfolio center.

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 .