Correlation Between True North and Slate Office

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

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

Diversification Opportunities for True North and Slate Office

0.26

Correlation Coefficient

True North  Slate Office

Modest diversification

The 3 months correlation between True and Slate is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding True North Commercial and Slate Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Slate Office REIT and True North 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 True North Commercial are associated (or correlated) with Slate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Slate Office REIT has no effect on the direction of True North i.e., True North and Slate Office go up and down completely randomly.

Pair Corralation between True North and Slate Office

Assuming the 90 days trading horizon True North Commercial is expected to generate 0.68 times more return on investment than Slate Office. However, True North Commercial is 1.46 times less risky than Slate Office. It trades about -0.04 of its potential returns per unit of risk. Slate Office REIT is currently generating about -0.06 per unit of risk. If you would invest  3,337  in True North Commercial on August 31, 2024 and sell it today you would lose (2,185) from holding True North Commercial or give up 65.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

True North Commercial  vs.  Slate Office REIT

True North Commercial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in True North Commercial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, True North may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Slate Office REIT

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Slate Office REIT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Slate Office sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with True North and Slate Office

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

The idea behind True North Commercial and Slate Office REIT 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..