Correlation Between AvalonBay Communities and UMH Properties
Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities and UMH 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 AvalonBay Communities and UMH Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AvalonBay Communities and UMH Properties, you can compare the effects of market volatilities on AvalonBay Communities and UMH 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 AvalonBay Communities with a short position of UMH Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and UMH Properties.
Diversification Opportunities for AvalonBay Communities and UMH Properties
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AvalonBay and UMH is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and UMH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMH Properties 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 UMH Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMH Properties has no effect on the direction of AvalonBay Communities i.e., AvalonBay Communities and UMH Properties go up and down completely randomly.
Pair Corralation between AvalonBay Communities and UMH Properties
Considering the 90-day investment horizon AvalonBay Communities is expected to generate 1.17 times more return on investment than UMH Properties. However, AvalonBay Communities is 1.17 times more volatile than UMH Properties. It trades about 0.14 of its potential returns per unit of risk. UMH Properties is currently generating about 0.09 per unit of risk. If you would invest 22,776 in AvalonBay Communities on August 31, 2024 and sell it today you would earn a total of 1,005 from holding AvalonBay Communities or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AvalonBay Communities vs. UMH Properties
Performance |
| Timeline |
| AvalonBay Communities |
| UMH Properties |
AvalonBay Communities and UMH Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AvalonBay Communities and UMH Properties
The main advantage of trading using opposite AvalonBay Communities and UMH Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities position performs unexpectedly, UMH 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 UMH Properties will offset losses from the drop in UMH Properties' long position.| AvalonBay Communities vs. Apartment Investment and | AvalonBay Communities vs. Clipper Realty | AvalonBay Communities vs. BRT Realty Trust | AvalonBay Communities vs. UDR Inc |
| UMH Properties vs. Apartment Investment and | UMH Properties vs. Clipper Realty | UMH Properties vs. BRT Realty Trust | UMH Properties 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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