Correlation Between Highlands REIT and Essential Properties
Can any of the company-specific risk be diversified away by investing in both Highlands REIT and Essential Properties 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 Highlands REIT and Essential Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlands REIT and Essential Properties Realty, you can compare the effects of market volatilities on Highlands REIT and Essential Properties 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 Highlands REIT with a short position of Essential Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlands REIT and Essential Properties.
Diversification Opportunities for Highlands REIT and Essential Properties
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Highlands and Essential is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Highlands REIT and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and Highlands REIT 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 Highlands REIT are associated (or correlated) with Essential Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Properties has no effect on the direction of Highlands REIT i.e., Highlands REIT and Essential Properties go up and down completely randomly.
Pair Corralation between Highlands REIT and Essential Properties
Given the investment horizon of 90 days Highlands REIT is expected to generate 117.77 times more return on investment than Essential Properties. However, Highlands REIT is 117.77 times more volatile than Essential Properties Realty. It trades about 0.24 of its potential returns per unit of risk. Essential Properties Realty is currently generating about 0.14 per unit of risk. If you would invest 3.64 in Highlands REIT on August 25, 2024 and sell it today you would earn a total of 7.36 from holding Highlands REIT or generate 202.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.66% |
| Values | Daily Returns |
Highlands REIT vs. Essential Properties Realty
Performance |
| Timeline |
| Highlands REIT |
| Essential Properties |
Highlands REIT and Essential Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlands REIT and Essential Properties
The main advantage of trading using opposite Highlands REIT and Essential Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlands REIT position performs unexpectedly, Essential Properties 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 Essential Properties will offset losses from the drop in Essential Properties' long position.| Highlands REIT vs. Smart REIT | Highlands REIT vs. Phillips Edison Co | Highlands REIT vs. Simon Property Group | Highlands REIT vs. Plaza Retail REIT |
| Essential Properties vs. Armada Hflr Pr | Essential Properties vs. CTO Realty Growth | Essential Properties vs. Brightspire Capital | Essential Properties vs. Broadstone Net Lease |
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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