Correlation Between Mid America and Centerspace
Can any of the company-specific risk be diversified away by investing in both Mid America and Centerspace 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 Centerspace 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 Centerspace, you can compare the effects of market volatilities on Mid America and Centerspace 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 Centerspace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid America and Centerspace.
Diversification Opportunities for Mid America and Centerspace
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mid and Centerspace is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and Centerspace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerspace 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 Centerspace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerspace has no effect on the direction of Mid America i.e., Mid America and Centerspace go up and down completely randomly.
Pair Corralation between Mid America and Centerspace
Assuming the 90 days trading horizon Mid America is expected to generate 8.16 times less return on investment than Centerspace. But when comparing it to its historical volatility, Mid America Apartment Communities is 2.85 times less risky than Centerspace. It trades about 0.1 of its potential returns per unit of risk. Centerspace is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,676 in Centerspace on September 2, 2024 and sell it today you would earn a total of 574.00 from holding Centerspace or generate 8.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid America Apartment Communit vs. Centerspace
Performance |
| Timeline |
| Mid America Apartment |
| Centerspace |
Mid America and Centerspace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid America and Centerspace
The main advantage of trading using opposite Mid America and Centerspace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid America position performs unexpectedly, Centerspace 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 Centerspace will offset losses from the drop in Centerspace's long position.| Mid America vs. American Homes 4 | Mid America vs. BRT Realty Trust | Mid America vs. Nexpoint Residential Trust | Mid America vs. Centerspace |
| Centerspace vs. BRT Realty Trust | Centerspace vs. Nexpoint Residential Trust | Centerspace vs. Veris Residential | Centerspace vs. Clipper Realty |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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