Correlation Between Equity Residential and Sun Communities
Can any of the company-specific risk be diversified away by investing in both Equity Residential and Sun Communities 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 Sun Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Residential and Sun Communities, you can compare the effects of market volatilities on Equity Residential and Sun Communities 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 Sun Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Residential and Sun Communities.
Diversification Opportunities for Equity Residential and Sun Communities
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Equity and Sun is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities 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 Sun Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Communities has no effect on the direction of Equity Residential i.e., Equity Residential and Sun Communities go up and down completely randomly.
Pair Corralation between Equity Residential and Sun Communities
Assuming the 90 days trading horizon Equity Residential is expected to generate 0.04 times more return on investment than Sun Communities. However, Equity Residential is 24.62 times less risky than Sun Communities. It trades about 0.23 of its potential returns per unit of risk. Sun Communities is currently generating about 0.0 per unit of risk. If you would invest 22,082 in Equity Residential on October 17, 2024 and sell it today you would earn a total of 138.00 from holding Equity Residential or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Residential vs. Sun Communities
Performance |
| Timeline |
| Equity Residential |
| Sun Communities |
Equity Residential and Sun Communities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Residential and Sun Communities
The main advantage of trading using opposite Equity Residential and Sun Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential position performs unexpectedly, Sun Communities 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 Sun Communities will offset losses from the drop in Sun Communities' 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 |
| Sun Communities vs. AvalonBay Communities | Sun Communities vs. Mid America Apartment Communities | Sun Communities vs. Essex Property Trust | Sun Communities vs. Apartment Investment and |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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