Correlation Between W P and Urban Edge

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

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

Diversification Opportunities for W P and Urban Edge

-0.77

Correlation Coefficient

W P  Urban Edge

Pay attention - limited upside

The 3 months correlation between WPC and Urban is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding W P Carey and Urban Edge Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Edge Properties and W P 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 W P Carey are associated (or correlated) with Urban Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urban Edge Properties has no effect on the direction of W P i.e., W P and Urban Edge go up and down completely randomly.

Pair Corralation between W P and Urban Edge

Considering the 90-day investment horizon W P Carey is expected to under-perform the Urban Edge. But the stock apears to be less risky and, when comparing its historical volatility, W P Carey is 1.13 times less risky than Urban Edge. The stock trades about -0.18 of its potential returns per unit of risk. The Urban Edge Properties is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,139  in Urban Edge Properties on August 31, 2024 and sell it today you would earn a total of  192.00  from holding Urban Edge Properties or generate 8.98% return on investment over 90 days.

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

W P Carey  vs.  Urban Edge Properties

W P Carey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W P Carey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, W P is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Urban Edge Properties

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Edge Properties are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Urban Edge exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with W P and Urban Edge

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

The idea behind W P Carey and Urban Edge 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.