Correlation Between Equity Lifestyle and Independence Realty
Can any of the company-specific risk be diversified away by investing in both Equity Lifestyle and Independence Realty 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 Independence Realty 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 Independence Realty Trust, you can compare the effects of market volatilities on Equity Lifestyle and Independence Realty 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 Independence Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Lifestyle and Independence Realty.
Diversification Opportunities for Equity Lifestyle and Independence Realty
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and Independence is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Equity Lifestyle Properties and Independence Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independence Realty 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 Independence Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independence Realty Trust has no effect on the direction of Equity Lifestyle i.e., Equity Lifestyle and Independence Realty go up and down completely randomly.
Pair Corralation between Equity Lifestyle and Independence Realty
Considering the 90-day investment horizon Equity Lifestyle is expected to generate 16.54 times less return on investment than Independence Realty. But when comparing it to its historical volatility, Equity Lifestyle Properties is 1.29 times less risky than Independence Realty. It trades about 0.02 of its potential returns per unit of risk. Independence Realty Trust is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,991 in Independence Realty Trust on August 24, 2024 and sell it today you would earn a total of 157.00 from holding Independence Realty Trust or generate 7.89% 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. Independence Realty Trust
Performance |
| Timeline |
| Equity Lifestyle Pro |
| Independence Realty Trust |
Equity Lifestyle and Independence Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Lifestyle and Independence Realty
The main advantage of trading using opposite Equity Lifestyle and Independence Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Lifestyle position performs unexpectedly, Independence Realty 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 Independence Realty will offset losses from the drop in Independence Realty's long position.| Equity Lifestyle vs. UMH Properties | Equity Lifestyle vs. UDR Inc | Equity Lifestyle vs. AvalonBay Communities | Equity Lifestyle vs. Nexpoint Residential Trust |
| Independence Realty vs. Apartment Investment and | Independence Realty vs. Clipper Realty | Independence Realty vs. BRT Realty Trust | Independence Realty 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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