Correlation Between Swan Defined and Real Estate

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

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

Diversification Opportunities for Swan Defined and Real Estate

0.67

Correlation Coefficient

Swan Defined  Real Estate

Poor diversification

The 3 months correlation between Swan and Real is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and Real Estate Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Ultrasector and Swan Defined 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 Swan Defined Risk are associated (or correlated) with Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Ultrasector has no effect on the direction of Swan Defined i.e., Swan Defined and Real Estate go up and down completely randomly.

Pair Corralation between Swan Defined and Real Estate

Assuming the 90 days horizon Swan Defined Risk is expected to generate 0.29 times more return on investment than Real Estate. However, Swan Defined Risk is 3.39 times less risky than Real Estate. It trades about 0.36 of its potential returns per unit of risk. Real Estate Ultrasector is currently generating about 0.08 per unit of risk. If you would invest  1,363  in Swan Defined Risk on April 29, 2025 and sell it today you would earn a total of  115.00  from holding Swan Defined Risk or generate 8.44% return on investment over 90 days.

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

Swan Defined Risk  vs.  Real Estate Ultrasector

Swan Defined Risk

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Swan Defined Risk are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Swan Defined may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Real Estate Ultrasector

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Real Estate Ultrasector are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Real Estate may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Swan Defined and Real Estate

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

The idea behind Swan Defined Risk and Real Estate Ultrasector 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.