Correlation Between WT Offshore and SELECT

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

By analyzing existing cross correlation between WT Offshore and SELECT INCOME REIT, you can compare the effects of market volatilities on WT Offshore and SELECT 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 WT Offshore with a short position of SELECT. Check out your portfolio center. Please also check ongoing floating volatility patterns of WT Offshore and SELECT.

Diversification Opportunities for WT Offshore and SELECT

-0.07

Correlation Coefficient

WT Offshore  SELECT

Good diversification

The 3 months correlation between WTI and SELECT is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding WT Offshore and SELECT INCOME REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SELECT INCOME REIT and WT Offshore 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 WT Offshore are associated (or correlated) with SELECT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SELECT INCOME REIT has no effect on the direction of WT Offshore i.e., WT Offshore and SELECT go up and down completely randomly.

Pair Corralation between WT Offshore and SELECT

Considering the 90-day investment horizon WT Offshore is expected to under-perform the SELECT. But the stock apears to be less risky and, when comparing its historical volatility, WT Offshore is 1.84 times less risky than SELECT. The stock trades about -0.4 of its potential returns per unit of risk. The SELECT INCOME REIT is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,970  in SELECT INCOME REIT on September 12, 2024 and sell it today you would earn a total of  415.00  from holding SELECT INCOME REIT or generate 4.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

WT Offshore  vs.  SELECT INCOME REIT

WT Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, WT Offshore is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

SELECT INCOME REIT

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with WT Offshore and SELECT

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

The idea behind WT Offshore and SELECT INCOME REIT 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 Stocks Directory module to find actively traded stocks across global markets.