Correlation Between Equity Lifestyle and Essex Property
Can any of the company-specific risk be diversified away by investing in both Equity Lifestyle and Essex Property 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 Lifestyle and Essex Property into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Lifestyle Properties and Essex Property Trust, you can compare the effects of market volatilities on Equity Lifestyle and Essex Property 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 Lifestyle with a short position of Essex Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Lifestyle and Essex Property.
Diversification Opportunities for Equity Lifestyle and Essex Property
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and Essex is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Equity Lifestyle Properties and Essex Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Property Trust and Equity Lifestyle 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 Lifestyle Properties are associated (or correlated) with Essex Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Property Trust has no effect on the direction of Equity Lifestyle i.e., Equity Lifestyle and Essex Property go up and down completely randomly.
Pair Corralation between Equity Lifestyle and Essex Property
Considering the 90-day investment horizon Equity Lifestyle is expected to generate 2.31 times less return on investment than Essex Property. But when comparing it to its historical volatility, Equity Lifestyle Properties is 1.08 times less risky than Essex Property. It trades about 0.03 of its potential returns per unit of risk. Essex Property Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 21,986 in Essex Property Trust on August 31, 2024 and sell it today you would earn a total of 9,060 from holding Essex Property Trust or generate 41.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Lifestyle Properties vs. Essex Property Trust
Performance |
| Timeline |
| Equity Lifestyle Pro |
| Essex Property Trust |
Equity Lifestyle and Essex Property Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Lifestyle and Essex Property
The main advantage of trading using opposite Equity Lifestyle and Essex Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Lifestyle position performs unexpectedly, Essex Property 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 Essex Property will offset losses from the drop in Essex Property's long position.| Equity Lifestyle vs. UMH Properties | Equity Lifestyle vs. UDR Inc | Equity Lifestyle vs. AvalonBay Communities | Equity Lifestyle vs. Nexpoint Residential Trust |
| Essex Property vs. Equity Residential | Essex Property vs. Mid America Apartment Communities | Essex Property vs. Camden Property Trust | Essex Property vs. UDR Inc |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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