Correlation Between Equity Residential and Mid America
Can any of the company-specific risk be diversified away by investing in both Equity Residential and Mid America 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 Equity Residential and Mid America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Residential and Mid America Apartment Communities, you can compare the effects of market volatilities on Equity Residential and Mid America 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 Equity Residential with a short position of Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Residential and Mid America.
Diversification Opportunities for Equity Residential and Mid America
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Equity and Mid is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment and Equity Residential 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 Equity Residential are associated (or correlated) with Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of Equity Residential i.e., Equity Residential and Mid America go up and down completely randomly.
Pair Corralation between Equity Residential and Mid America
Assuming the 90 days trading horizon Equity Residential is expected to generate 0.62 times more return on investment than Mid America. However, Equity Residential is 1.62 times less risky than Mid America. It trades about 0.06 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about 0.03 per unit of risk. If you would invest 14,587 in Equity Residential on September 29, 2024 and sell it today you would earn a total of 7,495 from holding Equity Residential or generate 51.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 89.86% |
| Values | Daily Returns |
Equity Residential vs. Mid America Apartment Communit
Performance |
| Timeline |
| Equity Residential |
| Mid America Apartment |
Equity Residential and Mid America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Residential and Mid America
The main advantage of trading using opposite Equity Residential and Mid America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential position performs unexpectedly, Mid America 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 Mid America will offset losses from the drop in Mid America's long position.| Equity Residential vs. AvalonBay Communities | Equity Residential vs. Mid America Apartment Communities | Equity Residential vs. Sun Communities | Equity Residential vs. Essex Property Trust |
| Mid America vs. Equity Residential | Mid America vs. AvalonBay Communities | Mid America vs. Sun Communities | Mid America 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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