Correlation Between Essex Property and Apartment Investment
Can any of the company-specific risk be diversified away by investing in both Essex Property and Apartment Investment 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 Essex Property and Apartment Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essex Property Trust and Apartment Investment and, you can compare the effects of market volatilities on Essex Property and Apartment Investment 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 Essex Property with a short position of Apartment Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essex Property and Apartment Investment.
Diversification Opportunities for Essex Property and Apartment Investment
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Essex and Apartment is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Essex Property Trust and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and and Essex Property 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 Essex Property Trust are associated (or correlated) with Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of Essex Property i.e., Essex Property and Apartment Investment go up and down completely randomly.
Pair Corralation between Essex Property and Apartment Investment
Assuming the 90 days trading horizon Essex Property is expected to generate 10.11 times less return on investment than Apartment Investment. But when comparing it to its historical volatility, Essex Property Trust is 2.89 times less risky than Apartment Investment. It trades about 0.02 of its potential returns per unit of risk. Apartment Investment and is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,627 in Apartment Investment and on November 6, 2024 and sell it today you would earn a total of 618.00 from holding Apartment Investment and or generate 13.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Essex Property Trust vs. Apartment Investment and
Performance |
| Timeline |
| Essex Property Trust |
| Apartment Investment and |
Essex Property and Apartment Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essex Property and Apartment Investment
The main advantage of trading using opposite Essex Property and Apartment Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essex Property position performs unexpectedly, Apartment Investment 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 Apartment Investment will offset losses from the drop in Apartment Investment's long position.| Essex Property vs. AvalonBay Communities | Essex Property vs. Sun Communities | Essex Property vs. Apartment Investment and | Essex Property vs. Energisa SA |
| Apartment Investment vs. Martin Marietta Materials, | Apartment Investment vs. Live Nation Entertainment, | Apartment Investment vs. Patria Investments Limited | Apartment Investment vs. Marfrig Global Foods |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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