Correlation Between Real Estate and Cref Equity

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

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

Diversification Opportunities for Real Estate and Cref Equity

0.21

Correlation Coefficient

Real Estate  Cref Equity

Modest diversification

The 3 months correlation between Real and CREF is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Securities and Cref Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Equity Index and Real Estate 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 Real Estate Securities are associated (or correlated) with Cref Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Equity Index has no effect on the direction of Real Estate i.e., Real Estate and Cref Equity go up and down completely randomly.

Pair Corralation between Real Estate and Cref Equity

Assuming the 90 days horizon Real Estate is expected to generate 13.58 times less return on investment than Cref Equity. In addition to that, Real Estate is 1.32 times more volatile than Cref Equity Index. It trades about 0.01 of its total potential returns per unit of risk. Cref Equity Index is currently generating about 0.2 per unit of volatility. If you would invest  51,781  in Cref Equity Index on May 14, 2025 and sell it today you would earn a total of  4,377  from holding Cref Equity Index or generate 8.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Real Estate Securities  vs.  Cref Equity Index

Real Estate Securities

Risk-Adjusted Performance

Weakest

Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Real Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cref Equity Index

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Equity Index are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Cref Equity may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Real Estate and Cref Equity

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

The idea behind Real Estate Securities and Cref Equity Index 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.