Correlation Between Essential Properties and Armada Hoffler

Can any of the company-specific risk be diversified away by investing in both Essential Properties and Armada Hoffler 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 Essential Properties and Armada Hoffler into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Essential Properties Realty and Armada Hoffler Properties, you can compare the effects of market volatilities on Essential Properties and Armada Hoffler 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 Essential Properties with a short position of Armada Hoffler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Properties and Armada Hoffler.

Diversification Opportunities for Essential Properties and Armada Hoffler

0.4

Correlation Coefficient

Essential Properties  Armada Hoffler

Very weak diversification

The 3 months correlation between Essential and Armada is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and Armada Hoffler Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Hoffler Properties and Essential Properties 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 Essential Properties Realty are associated (or correlated) with Armada Hoffler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Hoffler Properties has no effect on the direction of Essential Properties i.e., Essential Properties and Armada Hoffler go up and down completely randomly.

Pair Corralation between Essential Properties and Armada Hoffler

Given the investment horizon of 90 days Essential Properties Realty is expected to generate 1.19 times more return on investment than Armada Hoffler. However, Essential Properties is 1.19 times more volatile than Armada Hoffler Properties. It trades about 0.08 of its potential returns per unit of risk. Armada Hoffler Properties is currently generating about 0.05 per unit of risk. If you would invest  2,128  in Essential Properties Realty on August 30, 2024 and sell it today you would earn a total of  1,303  from holding Essential Properties Realty or generate 61.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Essential Properties Realty  vs.  Armada Hoffler Properties

Essential Properties

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Essential Properties may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Armada Hoffler Properties

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Armada Hoffler Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Armada Hoffler is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Essential Properties and Armada Hoffler

The main advantage of trading using opposite Essential Properties and Armada Hoffler positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Properties position performs unexpectedly, Armada Hoffler 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 Armada Hoffler will offset losses from the drop in Armada Hoffler's long position.

The idea behind Essential Properties Realty and Armada Hoffler Properties pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.