Correlation Between American Assets and Essential Properties
Can any of the company-specific risk be diversified away by investing in both American Assets and Essential Properties 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 American Assets and Essential Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Assets Trust and Essential Properties Realty, you can compare the effects of market volatilities on American Assets and Essential Properties 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 American Assets with a short position of Essential Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Assets and Essential Properties.
Diversification Opportunities for American Assets and Essential Properties
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Essential is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding American Assets Trust and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and American Assets 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 American Assets Trust are associated (or correlated) with Essential Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Properties has no effect on the direction of American Assets i.e., American Assets and Essential Properties go up and down completely randomly.
Pair Corralation between American Assets and Essential Properties
Considering the 90-day investment horizon American Assets is expected to generate 2.28 times less return on investment than Essential Properties. In addition to that, American Assets is 1.45 times more volatile than Essential Properties Realty. It trades about 0.02 of its total potential returns per unit of risk. Essential Properties Realty is currently generating about 0.07 per unit of volatility. If you would invest 2,321 in Essential Properties Realty on August 27, 2024 and sell it today you would earn a total of 1,061 from holding Essential Properties Realty or generate 45.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Assets Trust vs. Essential Properties Realty
Performance |
| Timeline |
| American Assets Trust |
| Essential Properties |
American Assets and Essential Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Assets and Essential Properties
The main advantage of trading using opposite American Assets and Essential Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Assets position performs unexpectedly, Essential Properties 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 Essential Properties will offset losses from the drop in Essential Properties' long position.| American Assets vs. Essential Properties Realty | American Assets vs. Armada Hflr Pr | American Assets vs. CTO Realty Growth | American Assets vs. Brightspire Capital |
| Essential Properties vs. Armada Hflr Pr | Essential Properties vs. CTO Realty Growth | Essential Properties vs. Brightspire Capital | Essential Properties vs. Broadstone Net Lease |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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