Correlation Between Continental and Equity Residential
Can any of the company-specific risk be diversified away by investing in both Continental 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 Continental and Equity Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Camden Property Trust and Equity Residential, you can compare the effects of market volatilities on Continental 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 Continental with a short position of Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental and Equity Residential.
Diversification Opportunities for Continental and Equity Residential
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Continental and Equity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Camden Property Trust and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and Continental 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 Camden Property Trust 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 Continental i.e., Continental and Equity Residential go up and down completely randomly.
Pair Corralation between Continental and Equity Residential
Assuming the 90 days horizon Camden Property Trust is expected to generate 0.94 times more return on investment than Equity Residential. However, Camden Property Trust is 1.07 times less risky than Equity Residential. It trades about 0.07 of its potential returns per unit of risk. Equity Residential is currently generating about 0.07 per unit of risk. If you would invest 9,909 in Camden Property Trust on September 23, 2024 and sell it today you would earn a total of 1,091 from holding Camden Property Trust or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Camden Property Trust vs. Equity Residential
Performance |
| Timeline |
| Camden Property Trust |
| Equity Residential |
Continental and Equity Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Continental and Equity Residential
The main advantage of trading using opposite Continental and Equity Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental 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.| Continental vs. Equity Residential | Continental vs. AvalonBay Communities | Continental vs. UDR Inc | Continental vs. INVITATION HOMES DL |
| Equity Residential vs. AvalonBay Communities | Equity Residential vs. UDR Inc | Equity Residential vs. INVITATION HOMES DL | Equity Residential vs. Mid America Apartment Communities |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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