Correlation Between W P and Modiv

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

By analyzing existing cross correlation between W P Carey and Modiv Inc, you can compare the effects of market volatilities on W P and Modiv 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 W P with a short position of Modiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of W P and Modiv.

Diversification Opportunities for W P and Modiv

-0.47

Correlation Coefficient

W P  Modiv

Very good diversification

The 3 months correlation between WPC and Modiv is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding W P Carey and Modiv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modiv Inc and W P 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 W P Carey are associated (or correlated) with Modiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modiv Inc has no effect on the direction of W P i.e., W P and Modiv go up and down completely randomly.

Pair Corralation between W P and Modiv

Considering the 90-day investment horizon W P Carey is expected to generate 1.59 times more return on investment than Modiv. However, W P is 1.59 times more volatile than Modiv Inc. It trades about 0.12 of its potential returns per unit of risk. Modiv Inc is currently generating about -0.16 per unit of risk. If you would invest  5,619  in W P Carey on August 31, 2024 and sell it today you would earn a total of  132.00  from holding W P Carey or generate 2.35% return on investment over 90 days.

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

W P Carey  vs.  Modiv Inc

W P Carey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W P Carey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, W P is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Modiv Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Modiv Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Modiv is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with W P and Modiv

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

The idea behind W P Carey and Modiv Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.