Correlation Between Power REIT and Kite Realty

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

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

Diversification Opportunities for Power REIT and Kite Realty

-0.4

Correlation Coefficient

Power REIT  Kite Realty

Very good diversification

The 3 months correlation between Power and Kite is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Kite Realty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kite Realty Group and Power REIT 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 Power REIT are associated (or correlated) with Kite Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kite Realty Group has no effect on the direction of Power REIT i.e., Power REIT and Kite Realty go up and down completely randomly.

Pair Corralation between Power REIT and Kite Realty

Allowing for the 90-day total investment horizon Power REIT is expected to generate 6.41 times more return on investment than Kite Realty. However, Power REIT is 6.41 times more volatile than Kite Realty Group. It trades about 0.01 of its potential returns per unit of risk. Kite Realty Group is currently generating about 0.05 per unit of risk. If you would invest  521.00  in Power REIT on August 26, 2024 and sell it today you would lose (416.00) from holding Power REIT or give up 79.85% of portfolio value over 90 days.

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

Power REIT  vs.  Kite Realty Group

Power REIT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Kite Realty Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kite Realty Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Kite Realty may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Power REIT and Kite Realty

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

The idea behind Power REIT and Kite Realty Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.