Correlation Between Urban Edge and Franklin Street

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

By analyzing existing cross correlation between Urban Edge Properties and Franklin Street Properties, you can compare the effects of market volatilities on Urban Edge and Franklin Street 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 Urban Edge with a short position of Franklin Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Edge and Franklin Street.

Diversification Opportunities for Urban Edge and Franklin Street

0.69

Correlation Coefficient

Urban Edge  Franklin Street

Poor diversification

The 3 months correlation between Urban and Franklin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Franklin Street Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Street Prop and Urban Edge 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 Urban Edge Properties are associated (or correlated) with Franklin Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Street Prop has no effect on the direction of Urban Edge i.e., Urban Edge and Franklin Street go up and down completely randomly.

Pair Corralation between Urban Edge and Franklin Street

Allowing for the 90-day total investment horizon Urban Edge is expected to generate 1.46 times less return on investment than Franklin Street. But when comparing it to its historical volatility, Urban Edge Properties is 2.68 times less risky than Franklin Street. It trades about 0.12 of its potential returns per unit of risk. Franklin Street Properties is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Franklin Street Properties on September 29, 2024 and sell it today you would earn a total of  35.00  from holding Franklin Street Properties or generate 22.88% return on investment over 90 days.

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

Urban Edge Properties  vs.  Franklin Street Properties

Urban Edge Properties

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Edge Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Urban Edge is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Franklin Street Prop

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Street Properties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Franklin Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Urban Edge and Franklin Street

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

The idea behind Urban Edge Properties and Franklin Street 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.