Correlation Between Mid America and Equity Residential
Can any of the company-specific risk be diversified away by investing in both Mid America and Equity Residential 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 Mid America and Equity Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid America Apartment Communities and Equity Residential, you can compare the effects of market volatilities on Mid America and Equity Residential 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 Mid America with a short position of Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid America and Equity Residential.
Diversification Opportunities for Mid America and Equity Residential
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and Equity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and Mid America 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 Mid America Apartment Communities are associated (or correlated) with Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Mid America i.e., Mid America and Equity Residential go up and down completely randomly.
Pair Corralation between Mid America and Equity Residential
Assuming the 90 days horizon Mid America Apartment Communities is expected to under-perform the Equity Residential. But the stock apears to be less risky and, when comparing its historical volatility, Mid America Apartment Communities is 1.08 times less risky than Equity Residential. The stock trades about -0.17 of its potential returns per unit of risk. The Equity Residential is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 7,100 in Equity Residential on September 22, 2024 and sell it today you would lose (250.00) from holding Equity Residential or give up 3.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid America Apartment Communit vs. Equity Residential
Performance |
| Timeline |
| Mid America Apartment |
| Equity Residential |
Mid America and Equity Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid America and Equity Residential
The main advantage of trading using opposite Mid America and Equity Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid America position performs unexpectedly, Equity Residential 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 Residential will offset losses from the drop in Equity Residential's long position.| Mid America vs. Equity Residential | Mid America vs. AvalonBay Communities | Mid America vs. UDR Inc | Mid America vs. INVITATION HOMES DL |
| Equity Residential vs. JSC Halyk bank | Equity Residential vs. GUARDANT HEALTH CL | Equity Residential vs. YOOMA WELLNESS INC | Equity Residential vs. OAKTRSPECLENDNEW |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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