Correlation Between Marks Spencer and Riocan REIT

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

By analyzing existing cross correlation between Marks Spencer Group and Riocan REIT, you can compare the effects of market volatilities on Marks Spencer and Riocan REIT 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 Marks Spencer with a short position of Riocan REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marks Spencer and Riocan REIT.

Diversification Opportunities for Marks Spencer and Riocan REIT

-0.46

Correlation Coefficient

Marks Spencer  Riocan REIT

Very good diversification

The 3 months correlation between Marks and Riocan is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Marks Spencer Group and Riocan REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riocan REIT and Marks Spencer 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 Marks Spencer Group are associated (or correlated) with Riocan REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riocan REIT has no effect on the direction of Marks Spencer i.e., Marks Spencer and Riocan REIT go up and down completely randomly.

Pair Corralation between Marks Spencer and Riocan REIT

Assuming the 90 days horizon Marks Spencer Group is expected to generate 1.14 times more return on investment than Riocan REIT. However, Marks Spencer is 1.14 times more volatile than Riocan REIT. It trades about 0.2 of its potential returns per unit of risk. Riocan REIT is currently generating about -0.04 per unit of risk. If you would invest  639.00  in Marks Spencer Group on March 12, 2024 and sell it today you would earn a total of  155.00  from holding Marks Spencer Group or generate 24.26% return on investment over 90 days.

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

Marks Spencer Group  vs.  Riocan REIT

Marks Spencer Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marks Spencer Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Marks Spencer showed solid returns over the last few months and may actually be approaching a breakup point.

Riocan REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riocan REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Riocan REIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Marks Spencer and Riocan REIT

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

The idea behind Marks Spencer Group and Riocan REIT 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 Global Correlations module to find global opportunities by holding instruments from different markets.