Correlation Between Automotive Properties and Choice Properties

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

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

Diversification Opportunities for Automotive Properties and Choice Properties

0.53

Correlation Coefficient

Automotive Properties  Choice Properties

Very weak diversification

The 3 months correlation between Automotive and Choice is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Properties Real and Choice Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Properties Real and Automotive Properties 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 Automotive Properties Real are associated (or correlated) with Choice Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Properties Real has no effect on the direction of Automotive Properties i.e., Automotive Properties and Choice Properties go up and down completely randomly.

Pair Corralation between Automotive Properties and Choice Properties

Assuming the 90 days trading horizon Automotive Properties Real is expected to generate 0.87 times more return on investment than Choice Properties. However, Automotive Properties Real is 1.15 times less risky than Choice Properties. It trades about 0.31 of its potential returns per unit of risk. Choice Properties Real is currently generating about 0.05 per unit of risk. If you would invest  982.00  in Automotive Properties Real on April 20, 2025 and sell it today you would earn a total of  161.00  from holding Automotive Properties Real or generate 16.4% return on investment over 90 days.

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

Automotive Properties Real  vs.  Choice Properties Real

Automotive Properties

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Properties Real are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Automotive Properties sustained solid returns over the last few months and may actually be approaching a breakup point.

Choice Properties Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Properties Real are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Choice Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Automotive Properties and Choice Properties

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

The idea behind Automotive Properties Real and Choice Properties Real 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.