Correlation Between AvalonBay Communities and Equity Residential
Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities and Equity Residential 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 AvalonBay Communities and Equity Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AvalonBay Communities and Equity Residential, you can compare the effects of market volatilities on AvalonBay Communities and Equity Residential 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 AvalonBay Communities with a short position of Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and Equity Residential.
Diversification Opportunities for AvalonBay Communities and Equity Residential
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AvalonBay and Equity is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and AvalonBay Communities 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 AvalonBay Communities are associated (or correlated) with Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of AvalonBay Communities i.e., AvalonBay Communities and Equity Residential go up and down completely randomly.
Pair Corralation between AvalonBay Communities and Equity Residential
Assuming the 90 days trading horizon AvalonBay Communities is expected to under-perform the Equity Residential. In addition to that, AvalonBay Communities is 12.23 times more volatile than Equity Residential. It trades about -0.1 of its total potential returns per unit of risk. Equity Residential is currently generating about 0.23 per unit of volatility. If you would invest 22,082 in Equity Residential on October 17, 2024 and sell it today you would earn a total of 138.00 from holding Equity Residential or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
AvalonBay Communities vs. Equity Residential
Performance |
| Timeline |
| AvalonBay Communities |
| Equity Residential |
AvalonBay Communities and Equity Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AvalonBay Communities and Equity Residential
The main advantage of trading using opposite AvalonBay Communities and Equity Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities position performs unexpectedly, Equity Residential 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 Equity Residential will offset losses from the drop in Equity Residential's long position.| AvalonBay Communities vs. Applied Materials, | AvalonBay Communities vs. GP Investments | AvalonBay Communities vs. Electronic Arts | AvalonBay Communities vs. METISA Metalrgica Timboense |
| Equity Residential vs. AvalonBay Communities | Equity Residential vs. Mid America Apartment Communities | Equity Residential vs. Sun Communities | Equity Residential vs. Essex Property Trust |
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 the Equity Valuation module to check real value of public entities based on technical and fundamental data.
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