Correlation Between WP Carey and American Assets

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Can any of the company-specific risk be diversified away by investing in both WP Carey and American Assets 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 WP Carey and American Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WP Carey Co and American Assets Trust, you can compare the effects of market volatilities on WP Carey and American Assets 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 WP Carey with a short position of American Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of WP Carey and American Assets.

Diversification Opportunities for WP Carey and American Assets

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between WP Carey and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding WP Carey Co and American Assets Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Assets Trust and WP Carey 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 WP Carey Co are associated (or correlated) with American Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Assets Trust has no effect on the direction of WP Carey i.e., WP Carey and American Assets go up and down completely randomly.

Pair Corralation between WP Carey and American Assets

Considering the 90-day investment horizon WP Carey Co is expected to generate 0.72 times more return on investment than American Assets. However, WP Carey Co is 1.39 times less risky than American Assets. It trades about 0.05 of its potential returns per unit of risk. American Assets Trust is currently generating about 0.01 per unit of risk. If you would invest  6,233  in WP Carey Co on August 28, 2022 and sell it today you would earn a total of  1,805  from holding WP Carey Co or generate 28.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

WP Carey Co  vs.  American Assets Trust

 Performance (%) 
       Timeline  
WP Carey 
WP Carey Performance
0 of 100
Over the last 90 days WP Carey Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WP Carey is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

WP Carey Price Channel

American Assets Trust 
American Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Assets Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, American Assets is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

American Price Channel

WP Carey and American Assets Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WP Carey and American Assets

The main advantage of trading using opposite WP Carey and American Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WP Carey position performs unexpectedly, American Assets 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 American Assets will offset losses from the drop in American Assets' long position.
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The idea behind WP Carey Co and American Assets Trust 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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Check out your portfolio center. 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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