Correlation Between Apartment Investment and Equity Residential
Can any of the company-specific risk be diversified away by investing in both Apartment Investment 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 Apartment Investment and Equity Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apartment Investment and and Equity Residential, you can compare the effects of market volatilities on Apartment Investment 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 Apartment Investment with a short position of Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apartment Investment and Equity Residential.
Diversification Opportunities for Apartment Investment and Equity Residential
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apartment and Equity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Investment and and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and Apartment Investment 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 Apartment Investment and 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 Apartment Investment i.e., Apartment Investment and Equity Residential go up and down completely randomly.
Pair Corralation between Apartment Investment and Equity Residential
Assuming the 90 days trading horizon Apartment Investment and is expected to under-perform the Equity Residential. But the stock apears to be less risky and, when comparing its historical volatility, Apartment Investment and is 1.24 times less risky than Equity Residential. The stock trades about -0.01 of its potential returns per unit of risk. The Equity Residential is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 21,010 in Equity Residential on September 23, 2024 and sell it today you would earn a total of 1,210 from holding Equity Residential or generate 5.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Apartment Investment and vs. Equity Residential
Performance |
Timeline |
Apartment Investment and |
Equity Residential |
Apartment Investment and Equity Residential Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Apartment Investment and Equity Residential
The main advantage of trading using opposite Apartment Investment and Equity Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apartment Investment 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.Apartment Investment vs. AvalonBay Communities | Apartment Investment vs. Sun Communities | Apartment Investment vs. Essex Property Trust |
Equity Residential vs. AvalonBay Communities | Equity Residential vs. Mid America Apartment Communities | Equity Residential vs. Sun Communities | Equity Residential vs. Essex Property Trust |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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