Correlation Between Value Fund and Real Estate

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

By analyzing existing cross correlation between Value Fund Investor and Real Estate Fund, you can compare the effects of market volatilities on Value Fund and Real Estate 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 Value Fund with a short position of Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Real Estate.

Diversification Opportunities for Value Fund and Real Estate

0.34

Correlation Coefficient

Value Fund  Real Estate

Weak diversification

The 3 months correlation between Value and Real is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor and Real Estate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Fund and Value Fund 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 Value Fund Investor are associated (or correlated) with Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Fund has no effect on the direction of Value Fund i.e., Value Fund and Real Estate go up and down completely randomly.

Pair Corralation between Value Fund and Real Estate

Assuming the 90 days horizon Value Fund Investor is expected to generate 0.67 times more return on investment than Real Estate. However, Value Fund Investor is 1.5 times less risky than Real Estate. It trades about 0.26 of its potential returns per unit of risk. Real Estate Fund is currently generating about 0.12 per unit of risk. If you would invest  857.00  in Value Fund Investor on August 31, 2024 and sell it today you would earn a total of  34.00  from holding Value Fund Investor or generate 3.97% return on investment over 90 days.

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

Value Fund Investor  vs.  Real Estate Fund

Value Fund Investor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund Investor are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Real Estate Fund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Real Estate Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Real Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Value Fund and Real Estate

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

The idea behind Value Fund Investor and Real Estate Fund 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.