Correlation Between Sun Communities and Equity Residential
Can any of the company-specific risk be diversified away by investing in both Sun Communities and Equity Residential 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 Sun Communities and Equity Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Communities and Equity Residential, you can compare the effects of market volatilities on Sun Communities and Equity Residential 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 Sun Communities with a short position of Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Communities and Equity Residential.
Diversification Opportunities for Sun Communities and Equity Residential
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sun and Equity is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sun Communities and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and Sun Communities 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 Sun Communities are associated (or correlated) with Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Sun Communities i.e., Sun Communities and Equity Residential go up and down completely randomly.
Pair Corralation between Sun Communities and Equity Residential
Assuming the 90 days horizon Sun Communities is expected to generate 1.07 times more return on investment than Equity Residential. However, Sun Communities is 1.07 times more volatile than Equity Residential. It trades about -0.12 of its potential returns per unit of risk. Equity Residential is currently generating about -0.22 per unit of risk. If you would invest 12,200 in Sun Communities on September 23, 2024 and sell it today you would lose (400.00) from holding Sun Communities or give up 3.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Communities vs. Equity Residential
Performance |
| Timeline |
| Sun Communities |
| Equity Residential |
Sun Communities and Equity Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Communities and Equity Residential
The main advantage of trading using opposite Sun Communities and Equity Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Communities position performs unexpectedly, Equity Residential 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 Equity Residential will offset losses from the drop in Equity Residential's long position.| Sun Communities vs. Equity Residential | Sun Communities vs. AvalonBay Communities | Sun Communities vs. UDR Inc | Sun Communities vs. INVITATION HOMES DL |
| Equity Residential vs. AvalonBay Communities | Equity Residential vs. UDR Inc | Equity Residential vs. INVITATION HOMES DL | Equity Residential 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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