Correlation Between Equity LifeStyle and Sun Communities
Can any of the company-specific risk be diversified away by investing in both Equity LifeStyle and Sun Communities 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 Equity LifeStyle and Sun Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity LifeStyle Properties and Sun Communities, you can compare the effects of market volatilities on Equity LifeStyle and Sun Communities 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 Equity LifeStyle with a short position of Sun Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity LifeStyle and Sun Communities.
Diversification Opportunities for Equity LifeStyle and Sun Communities
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Equity and Sun is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Equity LifeStyle Properties and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities and Equity LifeStyle 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 Equity LifeStyle Properties are associated (or correlated) with Sun Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Communities has no effect on the direction of Equity LifeStyle i.e., Equity LifeStyle and Sun Communities go up and down completely randomly.
Pair Corralation between Equity LifeStyle and Sun Communities
Assuming the 90 days horizon Equity LifeStyle is expected to generate 1.04 times less return on investment than Sun Communities. But when comparing it to its historical volatility, Equity LifeStyle Properties is 1.27 times less risky than Sun Communities. It trades about 0.06 of its potential returns per unit of risk. Sun Communities is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 10,822 in Sun Communities on September 23, 2024 and sell it today you would earn a total of 978.00 from holding Sun Communities or generate 9.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity LifeStyle Properties vs. Sun Communities
Performance |
| Timeline |
| Equity LifeStyle Pro |
| Sun Communities |
Equity LifeStyle and Sun Communities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity LifeStyle and Sun Communities
The main advantage of trading using opposite Equity LifeStyle and Sun Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity LifeStyle position performs unexpectedly, Sun Communities 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 Sun Communities will offset losses from the drop in Sun Communities' long position.| Equity LifeStyle vs. Equity Residential | Equity LifeStyle vs. AvalonBay Communities | Equity LifeStyle vs. UDR Inc | Equity LifeStyle vs. INVITATION HOMES DL |
| Sun Communities vs. Equity Residential | Sun Communities vs. AvalonBay Communities | Sun Communities vs. UDR Inc | Sun Communities vs. INVITATION HOMES DL |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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