Correlation Between Mid America and Essex Property
Can any of the company-specific risk be diversified away by investing in both Mid America and Essex Property 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 Essex Property 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 Essex Property Trust, you can compare the effects of market volatilities on Mid America and Essex Property 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 Essex Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid America and Essex Property.
Diversification Opportunities for Mid America and Essex Property
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and Essex is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and Essex Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Property Trust 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 Essex Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Property Trust has no effect on the direction of Mid America i.e., Mid America and Essex Property go up and down completely randomly.
Pair Corralation between Mid America and Essex Property
Considering the 90-day investment horizon Mid America is expected to generate 3.32 times less return on investment than Essex Property. But when comparing it to its historical volatility, Mid America Apartment Communities is 1.08 times less risky than Essex Property. It trades about 0.02 of its potential returns per unit of risk. Essex Property Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 20,031 in Essex Property Trust on August 28, 2024 and sell it today you would earn a total of 10,944 from holding Essex Property Trust or generate 54.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid America Apartment Communit vs. Essex Property Trust
Performance |
| Timeline |
| Mid America Apartment |
| Essex Property Trust |
Mid America and Essex Property Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid America and Essex Property
The main advantage of trading using opposite Mid America and Essex Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid America position performs unexpectedly, Essex Property 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 Essex Property will offset losses from the drop in Essex Property's long position.| Mid America vs. AvalonBay Communities | Mid America vs. Essex Property Trust | Mid America vs. Equity Residential | Mid America vs. UDR Inc |
| Essex Property vs. Equity Residential | Essex Property vs. Mid America Apartment Communities | Essex Property vs. Camden Property Trust | Essex Property vs. UDR Inc |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |