Correlation Between Essex Property and Mid America
Can any of the company-specific risk be diversified away by investing in both Essex Property and Mid America 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 Mid America 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 Mid America Apartment Communities, you can compare the effects of market volatilities on Essex Property and Mid America 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 Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essex Property and Mid America.
Diversification Opportunities for Essex Property and Mid America
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Essex and Mid is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Essex Property Trust and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment 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 Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of Essex Property i.e., Essex Property and Mid America go up and down completely randomly.
Pair Corralation between Essex Property and Mid America
Assuming the 90 days horizon Essex Property Trust is expected to generate 1.09 times more return on investment than Mid America. However, Essex Property is 1.09 times more volatile than Mid America Apartment Communities. It trades about 0.06 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about 0.02 per unit of risk. If you would invest 18,356 in Essex Property Trust on September 22, 2024 and sell it today you would earn a total of 8,834 from holding Essex Property Trust or generate 48.13% 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. Mid America Apartment Communit
Performance |
| Timeline |
| Essex Property Trust |
| Mid America Apartment |
Essex Property and Mid America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essex Property and Mid America
The main advantage of trading using opposite Essex Property and Mid America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essex Property position performs unexpectedly, Mid America 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 Mid America will offset losses from the drop in Mid America's long position.| Essex Property vs. Equity Residential | Essex Property vs. AvalonBay Communities | Essex Property vs. UDR Inc | Essex Property vs. INVITATION HOMES DL |
| Mid America vs. Equity Residential | Mid America vs. AvalonBay Communities | Mid America vs. UDR Inc | Mid America 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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