Correlation Between Equity LifeStyle and UDR
Can any of the company-specific risk be diversified away by investing in both Equity LifeStyle and UDR 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 UDR 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 UDR Inc, you can compare the effects of market volatilities on Equity LifeStyle and UDR 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 UDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity LifeStyle and UDR.
Diversification Opportunities for Equity LifeStyle and UDR
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and UDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Equity LifeStyle Properties and UDR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UDR Inc 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 UDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UDR Inc has no effect on the direction of Equity LifeStyle i.e., Equity LifeStyle and UDR go up and down completely randomly.
Pair Corralation between Equity LifeStyle and UDR
Assuming the 90 days horizon Equity LifeStyle is expected to generate 1.25 times less return on investment than UDR. In addition to that, Equity LifeStyle is 1.13 times more volatile than UDR Inc. It trades about 0.06 of its total potential returns per unit of risk. UDR Inc is currently generating about 0.09 per unit of volatility. If you would invest 3,711 in UDR Inc on September 23, 2024 and sell it today you would earn a total of 454.00 from holding UDR Inc or generate 12.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity LifeStyle Properties vs. UDR Inc
Performance |
| Timeline |
| Equity LifeStyle Pro |
| UDR Inc |
Equity LifeStyle and UDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity LifeStyle and UDR
The main advantage of trading using opposite Equity LifeStyle and UDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity LifeStyle position performs unexpectedly, UDR 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 UDR will offset losses from the drop in UDR's long position.| Equity LifeStyle vs. Equity Residential | Equity LifeStyle vs. AvalonBay Communities | Equity LifeStyle vs. UDR Inc | Equity LifeStyle vs. INVITATION HOMES DL |
| UDR vs. Equity Residential | UDR vs. AvalonBay Communities | UDR vs. INVITATION HOMES DL | UDR vs. Mid America Apartment Communities |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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