Correlation Between Veris Residential and BRT Realty

Can any of the company-specific risk be diversified away by investing in both Veris Residential and BRT Realty 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 Veris Residential and BRT Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Veris Residential and BRT Realty Trust, you can compare the effects of market volatilities on Veris Residential and BRT Realty 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 Veris Residential with a short position of BRT Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veris Residential and BRT Realty.

Diversification Opportunities for Veris Residential and BRT Realty

0.85

Correlation Coefficient

Veris Residential  BRT Realty

Very poor diversification

The 3 months correlation between Veris and BRT is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Veris Residential and BRT Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRT Realty Trust and Veris Residential 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 Veris Residential are associated (or correlated) with BRT Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRT Realty Trust has no effect on the direction of Veris Residential i.e., Veris Residential and BRT Realty go up and down completely randomly.

Pair Corralation between Veris Residential and BRT Realty

Considering the 90-day investment horizon Veris Residential is expected to generate 1.67 times less return on investment than BRT Realty. But when comparing it to its historical volatility, Veris Residential is 1.45 times less risky than BRT Realty. It trades about 0.07 of its potential returns per unit of risk. BRT Realty Trust is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,833  in BRT Realty Trust on September 3, 2024 and sell it today you would earn a total of  173.00  from holding BRT Realty Trust or generate 9.44% return on investment over 90 days.

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

Veris Residential  vs.  BRT Realty Trust

Veris Residential

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Veris Residential are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Veris Residential is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

BRT Realty Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BRT Realty Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BRT Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Veris Residential and BRT Realty

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

The idea behind Veris Residential and BRT Realty Trust 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.