Correlation Between Essential Properties and British Land
Can any of the company-specific risk be diversified away by investing in both Essential Properties and British Land 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 Essential Properties and British Land into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essential Properties Realty and British Land, you can compare the effects of market volatilities on Essential Properties and British Land 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 Essential Properties with a short position of British Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Properties and British Land.
Diversification Opportunities for Essential Properties and British Land
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Essential and British is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and British Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British Land and Essential Properties 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 Essential Properties Realty are associated (or correlated) with British Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British Land has no effect on the direction of Essential Properties i.e., Essential Properties and British Land go up and down completely randomly.
Pair Corralation between Essential Properties and British Land
Given the investment horizon of 90 days Essential Properties is expected to generate 1.8 times less return on investment than British Land. But when comparing it to its historical volatility, Essential Properties Realty is 2.78 times less risky than British Land. It trades about 0.14 of its potential returns per unit of risk. British Land is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 355.00 in British Land on August 25, 2024 and sell it today you would earn a total of 214.00 from holding British Land or generate 60.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 61.03% |
| Values | Daily Returns |
Essential Properties Realty vs. British Land
Performance |
| Timeline |
| Essential Properties |
| British Land |
Essential Properties and British Land Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essential Properties and British Land
The main advantage of trading using opposite Essential Properties and British Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Properties position performs unexpectedly, British Land 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 British Land will offset losses from the drop in British Land's long position.| Essential Properties vs. Armada Hflr Pr | Essential Properties vs. CTO Realty Growth | Essential Properties vs. Brightspire Capital | Essential Properties vs. Broadstone Net Lease |
| British Land vs. Highlands REIT | British Land vs. Fibra UNO | British Land vs. W P Carey | British Land vs. Essential Properties Realty |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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