Correlation Between Equity Residential and Equity Lifestyle
Can any of the company-specific risk be diversified away by investing in both Equity Residential 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 Equity Residential and Equity Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Residential and Equity Lifestyle Properties, you can compare the effects of market volatilities on Equity Residential 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 Equity Residential with a short position of Equity Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Residential and Equity Lifestyle.
Diversification Opportunities for Equity Residential and Equity Lifestyle
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and Equity is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential 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 Equity Residential 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 Residential 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 Equity Residential i.e., Equity Residential and Equity Lifestyle go up and down completely randomly.
Pair Corralation between Equity Residential and Equity Lifestyle
Considering the 90-day investment horizon Equity Residential is expected to generate 0.91 times more return on investment than Equity Lifestyle. However, Equity Residential is 1.1 times less risky than Equity Lifestyle. It trades about -0.01 of its potential returns per unit of risk. Equity Lifestyle Properties is currently generating about -0.04 per unit of risk. If you would invest 7,007 in Equity Residential on November 3, 2024 and sell it today you would lose (33.00) from holding Equity Residential or give up 0.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Residential vs. Equity Lifestyle Properties
Performance |
| Timeline |
| Equity Residential |
| Equity Lifestyle Pro |
Equity Residential and Equity Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Residential and Equity Lifestyle
The main advantage of trading using opposite Equity Residential and Equity Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential 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.| Equity Residential vs. Essex Property Trust | Equity Residential vs. Mid America Apartment Communities | Equity Residential vs. Camden Property Trust | Equity Residential vs. UDR Inc |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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