Correlation Between Elme Communities and Equity Lifestyle
Can any of the company-specific risk be diversified away by investing in both Elme Communities and Equity Lifestyle 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 Elme Communities and Equity Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elme Communities and Equity Lifestyle Properties, you can compare the effects of market volatilities on Elme Communities and Equity Lifestyle 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 Elme Communities with a short position of Equity Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elme Communities and Equity Lifestyle.
Diversification Opportunities for Elme Communities and Equity Lifestyle
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Elme and Equity is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Elme Communities and Equity Lifestyle Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Lifestyle Pro and Elme 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 Elme Communities are associated (or correlated) with Equity Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Lifestyle Pro has no effect on the direction of Elme Communities i.e., Elme Communities and Equity Lifestyle go up and down completely randomly.
Pair Corralation between Elme Communities and Equity Lifestyle
Given the investment horizon of 90 days Elme Communities is expected to under-perform the Equity Lifestyle. In addition to that, Elme Communities is 1.57 times more volatile than Equity Lifestyle Properties. It trades about -0.07 of its total potential returns per unit of risk. Equity Lifestyle Properties is currently generating about 0.16 per unit of volatility. If you would invest 6,894 in Equity Lifestyle Properties on August 29, 2024 and sell it today you would earn a total of 243.00 from holding Equity Lifestyle Properties or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elme Communities vs. Equity Lifestyle Properties
Performance |
| Timeline |
| Elme Communities |
| Equity Lifestyle Pro |
Elme Communities and Equity Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elme Communities and Equity Lifestyle
The main advantage of trading using opposite Elme Communities and Equity Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elme Communities position performs unexpectedly, Equity Lifestyle 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 Lifestyle will offset losses from the drop in Equity Lifestyle's long position.| Elme Communities vs. BRT Realty Trust | Elme Communities vs. Nexpoint Residential Trust | Elme Communities vs. Centerspace | Elme Communities vs. Veris Residential |
| Equity Lifestyle vs. UMH Properties | Equity Lifestyle vs. UDR Inc | Equity Lifestyle vs. AvalonBay Communities | Equity Lifestyle vs. Nexpoint Residential 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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