Correlation Between Spirit Realty and Essential Properties
Can any of the company-specific risk be diversified away by investing in both Spirit Realty 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 Spirit Realty and Essential Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirit Realty Capital and Essential Properties Realty, you can compare the effects of market volatilities on Spirit Realty 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 Spirit Realty with a short position of Essential Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirit Realty and Essential Properties.
Diversification Opportunities for Spirit Realty and Essential Properties
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Spirit and Essential is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Realty Capital and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and Spirit Realty 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 Spirit Realty Capital 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 Spirit Realty i.e., Spirit Realty and Essential Properties go up and down completely randomly.
Pair Corralation between Spirit Realty and Essential Properties
Considering the 90-day investment horizon Spirit Realty is expected to generate 1.69 times less return on investment than Essential Properties. But when comparing it to its historical volatility, Spirit Realty Capital is 1.02 times less risky than Essential Properties. It trades about 0.05 of its potential returns per unit of risk. Essential Properties Realty is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,109 in Essential Properties Realty on August 27, 2024 and sell it today you would earn a total of 1,238 from holding Essential Properties Realty or generate 58.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 31.85% |
| Values | Daily Returns |
Spirit Realty Capital vs. Essential Properties Realty
Performance |
| Timeline |
| Spirit Realty Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Essential Properties |
Spirit Realty and Essential Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirit Realty and Essential Properties
The main advantage of trading using opposite Spirit Realty and Essential Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Realty 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.| Spirit Realty vs. Broadstone Net Lease | Spirit Realty vs. Armada Hflr Pr | Spirit Realty vs. Brightspire Capital | Spirit Realty vs. Safehold |
| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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