Correlation Between Essex Property and Continental
Can any of the company-specific risk be diversified away by investing in both Essex Property and Continental 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 Essex Property and Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essex Property Trust and Camden Property Trust, you can compare the effects of market volatilities on Essex Property and Continental 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 Essex Property with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essex Property and Continental.
Diversification Opportunities for Essex Property and Continental
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Essex and Continental is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Essex Property Trust and Camden Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camden Property Trust and Essex Property 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 Essex Property Trust are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camden Property Trust has no effect on the direction of Essex Property i.e., Essex Property and Continental go up and down completely randomly.
Pair Corralation between Essex Property and Continental
Assuming the 90 days horizon Essex Property is expected to generate 1.28 times less return on investment than Continental. In addition to that, Essex Property is 1.1 times more volatile than Camden Property Trust. It trades about 0.05 of its total potential returns per unit of risk. Camden Property Trust is currently generating about 0.07 per unit of volatility. If you would invest 9,909 in Camden Property Trust on September 23, 2024 and sell it today you would earn a total of 1,091 from holding Camden Property Trust or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Essex Property Trust vs. Camden Property Trust
Performance |
| Timeline |
| Essex Property Trust |
| Camden Property Trust |
Essex Property and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essex Property and Continental
The main advantage of trading using opposite Essex Property and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essex Property position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.| Essex Property vs. Equity Residential | Essex Property vs. AvalonBay Communities | Essex Property vs. UDR Inc | Essex Property vs. INVITATION HOMES DL |
| Continental vs. Equity Residential | Continental vs. AvalonBay Communities | Continental vs. UDR Inc | Continental vs. INVITATION HOMES DL |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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