Correlation Between Urban Edge and Net Lease

Can any of the company-specific risk be diversified away by investing in both Urban Edge and Net Lease 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 Net Lease 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 Net Lease Office, you can compare the effects of market volatilities on Urban Edge and Net Lease 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 Net Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Edge and Net Lease.

Diversification Opportunities for Urban Edge and Net Lease

0.59

Correlation Coefficient

Urban Edge  Net Lease

Very weak diversification

The 3 months correlation between Urban and Net is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Net Lease Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net Lease Office 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 Net Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net Lease Office has no effect on the direction of Urban Edge i.e., Urban Edge and Net Lease go up and down completely randomly.

Pair Corralation between Urban Edge and Net Lease

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to generate 0.86 times more return on investment than Net Lease. However, Urban Edge Properties is 1.16 times less risky than Net Lease. It trades about 0.02 of its potential returns per unit of risk. Net Lease Office is currently generating about -0.02 per unit of risk. If you would invest  2,118  in Urban Edge Properties on September 24, 2024 and sell it today you would earn a total of  30.00  from holding Urban Edge Properties or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Urban Edge Properties  vs.  Net Lease Office

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.

Net Lease Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Net Lease Office has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Net Lease is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Urban Edge and Net Lease

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

The idea behind Urban Edge Properties and Net Lease Office 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.