Correlation Between Apartment Income and Essex Property
Can any of the company-specific risk be diversified away by investing in both Apartment Income and Essex Property 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 Apartment Income and Essex Property into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apartment Income REIT and Essex Property Trust, you can compare the effects of market volatilities on Apartment Income and Essex Property 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 Apartment Income with a short position of Essex Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apartment Income and Essex Property.
Diversification Opportunities for Apartment Income and Essex Property
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Apartment and Essex is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Income REIT and Essex Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Property Trust and Apartment Income 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 Apartment Income REIT are associated (or correlated) with Essex Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Property Trust has no effect on the direction of Apartment Income i.e., Apartment Income and Essex Property go up and down completely randomly.
Pair Corralation between Apartment Income and Essex Property
Given the investment horizon of 90 days Apartment Income REIT is expected to generate 1.94 times more return on investment than Essex Property. However, Apartment Income is 1.94 times more volatile than Essex Property Trust. It trades about 0.13 of its potential returns per unit of risk. Essex Property Trust is currently generating about 0.14 per unit of risk. If you would invest 3,039 in Apartment Income REIT on August 25, 2024 and sell it today you would earn a total of 869.00 from holding Apartment Income REIT or generate 28.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 45.26% |
| Values | Daily Returns |
Apartment Income REIT vs. Essex Property Trust
Performance |
| Timeline |
| Apartment Income REIT |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Essex Property Trust |
Apartment Income and Essex Property Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apartment Income and Essex Property
The main advantage of trading using opposite Apartment Income and Essex Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apartment Income position performs unexpectedly, Essex Property 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 Essex Property will offset losses from the drop in Essex Property's long position.| Apartment Income vs. Clipper Realty | Apartment Income vs. UDR Inc | Apartment Income vs. Nexpoint Residential Trust | Apartment Income vs. BRT Realty Trust |
| Essex Property vs. Equity Residential | Essex Property vs. Mid America Apartment Communities | Essex Property vs. Camden Property Trust | Essex Property vs. UDR Inc |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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