Correlation Between Modiv and Essential Properties
Can any of the company-specific risk be diversified away by investing in both Modiv 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 Modiv and Essential Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modiv Inc and Essential Properties Realty, you can compare the effects of market volatilities on Modiv 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 Modiv with a short position of Essential Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modiv and Essential Properties.
Diversification Opportunities for Modiv and Essential Properties
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Modiv and Essential is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Modiv Inc and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and Modiv 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 Modiv Inc 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 Modiv i.e., Modiv and Essential Properties go up and down completely randomly.
Pair Corralation between Modiv and Essential Properties
Assuming the 90 days trading horizon Modiv is expected to generate 1.25 times less return on investment than Essential Properties. But when comparing it to its historical volatility, Modiv Inc is 2.22 times less risky than Essential Properties. It trades about 0.18 of its potential returns per unit of risk. Essential Properties Realty is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,130 in Essential Properties Realty on August 26, 2024 and sell it today you would earn a total of 217.00 from holding Essential Properties Realty or generate 6.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Modiv Inc vs. Essential Properties Realty
Performance |
| Timeline |
| Modiv Inc |
| Essential Properties |
Modiv and Essential Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Modiv and Essential Properties
The main advantage of trading using opposite Modiv and Essential Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modiv 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.| Modiv vs. SiriusPoint | Modiv vs. RLJ Lodging Trust | Modiv vs. ARMOUR Residential REIT | Modiv vs. Sachem Capital Corp |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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