Correlation Between Power REIT and Rayonier

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

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

Diversification Opportunities for Power REIT and Rayonier

-0.58

Correlation Coefficient

Power REIT  Rayonier

Excellent diversification

The 3 months correlation between Power and Rayonier is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Rayonier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier 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 Rayonier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier has no effect on the direction of Power REIT i.e., Power REIT and Rayonier go up and down completely randomly.

Pair Corralation between Power REIT and Rayonier

Allowing for the 90-day total investment horizon Power REIT is expected to generate 9.15 times more return on investment than Rayonier. However, Power REIT is 9.15 times more volatile than Rayonier. It trades about 0.06 of its potential returns per unit of risk. Rayonier is currently generating about 0.01 per unit of risk. If you would invest  69.00  in Power REIT on August 16, 2024 and sell it today you would earn a total of  34.00  from holding Power REIT or generate 49.28% return on investment over 90 days.

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

Power REIT  vs.  Rayonier

Power REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Power REIT is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Rayonier

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rayonier are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Rayonier is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Power REIT and Rayonier

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

The idea behind Power REIT and Rayonier 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.