Correlation Between AvalonBay Communities and Mid America
Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities and Mid America 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 AvalonBay Communities and Mid America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AvalonBay Communities and Mid America Apartment Communities, you can compare the effects of market volatilities on AvalonBay Communities and Mid America 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 AvalonBay Communities with a short position of Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and Mid America.
Diversification Opportunities for AvalonBay Communities and Mid America
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AvalonBay and Mid is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment and AvalonBay 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 AvalonBay Communities are associated (or correlated) with Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of AvalonBay Communities i.e., AvalonBay Communities and Mid America go up and down completely randomly.
Pair Corralation between AvalonBay Communities and Mid America
Assuming the 90 days horizon AvalonBay Communities is expected to generate 0.94 times more return on investment than Mid America. However, AvalonBay Communities is 1.07 times less risky than Mid America. It trades about 0.07 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about 0.02 per unit of risk. If you would invest 14,102 in AvalonBay Communities on September 22, 2024 and sell it today you would earn a total of 7,213 from holding AvalonBay Communities or generate 51.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AvalonBay Communities vs. Mid America Apartment Communit
Performance |
| Timeline |
| AvalonBay Communities |
| Mid America Apartment |
AvalonBay Communities and Mid America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AvalonBay Communities and Mid America
The main advantage of trading using opposite AvalonBay Communities and Mid America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities position performs unexpectedly, Mid America 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 Mid America will offset losses from the drop in Mid America's long position.| AvalonBay Communities vs. Equity Residential | AvalonBay Communities vs. UDR Inc | AvalonBay Communities vs. INVITATION HOMES DL | AvalonBay Communities vs. Mid America Apartment Communities |
| Mid America vs. Equity Residential | Mid America vs. AvalonBay Communities | Mid America vs. UDR Inc | Mid America 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 Stocks Directory module to find actively traded stocks across global markets.
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