Correlation Between Federal Realty and Urban Edge

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

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

Diversification Opportunities for Federal Realty and Urban Edge

0.93

Correlation Coefficient

Federal Realty  Urban Edge

Almost no diversification

The 3 months correlation between Federal and Urban is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment 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 Federal Realty 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 Federal Realty Investment 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 Federal Realty i.e., Federal Realty and Urban Edge go up and down completely randomly.

Pair Corralation between Federal Realty and Urban Edge

Considering the 90-day investment horizon Federal Realty Investment is expected to generate 0.99 times more return on investment than Urban Edge. However, Federal Realty Investment is 1.01 times less risky than Urban Edge. It trades about -0.14 of its potential returns per unit of risk. Urban Edge Properties is currently generating about -0.14 per unit of risk. If you would invest  10,534  in Federal Realty Investment on January 6, 2025 and sell it today you would lose (1,625) from holding Federal Realty Investment or give up 15.43% of portfolio value over 90 days.

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

Federal Realty Investment  vs.  Urban Edge Properties

Federal Realty Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Realty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Edge Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Federal Realty and Urban Edge

The main advantage of trading using opposite Federal Realty and Urban Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Realty 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 Federal Realty Investment 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.