Correlation Between Essential Properties and Peakstone Realty

Can any of the company-specific risk be diversified away by investing in both Essential Properties and Peakstone Realty 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 Peakstone Realty 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 Peakstone Realty Trust, you can compare the effects of market volatilities on Essential Properties and Peakstone Realty 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 Peakstone Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Properties and Peakstone Realty.

Diversification Opportunities for Essential Properties and Peakstone Realty

0.44

Correlation Coefficient

Essential Properties  Peakstone Realty

Very weak diversification

The 3 months correlation between Essential and Peakstone is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and Peakstone Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peakstone Realty Trust 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 Peakstone Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peakstone Realty Trust has no effect on the direction of Essential Properties i.e., Essential Properties and Peakstone Realty go up and down completely randomly.

Pair Corralation between Essential Properties and Peakstone Realty

Given the investment horizon of 90 days Essential Properties Realty is expected to generate 0.36 times more return on investment than Peakstone Realty. However, Essential Properties Realty is 2.77 times less risky than Peakstone Realty. It trades about 0.12 of its potential returns per unit of risk. Peakstone Realty Trust is currently generating about 0.0 per unit of risk. If you would invest  2,346  in Essential Properties Realty on September 4, 2024 and sell it today you would earn a total of  959.00  from holding Essential Properties Realty or generate 40.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Essential Properties Realty  vs.  Peakstone Realty Trust

Essential Properties

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Essential Properties is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Peakstone Realty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Peakstone Realty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Peakstone Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Essential Properties and Peakstone Realty

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

The idea behind Essential Properties Realty and Peakstone Realty Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.