Correlation Between Independence Realty and Elme Communities

Can any of the company-specific risk be diversified away by investing in both Independence Realty and Elme Communities 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 Independence Realty and Elme Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Independence Realty and Elme Communities

-0.07

Correlation Coefficient

Independence Realty  Elme Communities

Good diversification

The 3 months correlation between Independence and Elme is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust and Elme Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elme Communities and Independence 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 Independence Realty Trust are associated (or correlated) with Elme Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elme Communities has no effect on the direction of Independence Realty i.e., Independence Realty and Elme Communities go up and down completely randomly.

Pair Corralation between Independence Realty and Elme Communities

Considering the 90-day investment horizon Independence Realty Trust is expected to generate 1.04 times more return on investment than Elme Communities. However, Independence Realty is 1.04 times more volatile than Elme Communities. It trades about 0.08 of its potential returns per unit of risk. Elme Communities is currently generating about -0.03 per unit of risk. If you would invest  2,052  in Independence Realty Trust on September 3, 2024 and sell it today you would earn a total of  132.00  from holding Independence Realty Trust or generate 6.43% return on investment over 90 days.

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

Independence Realty Trust  vs.  Elme Communities

Independence Realty Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Independence Realty Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Independence Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Elme Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elme Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Elme Communities is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Independence Realty and Elme Communities

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

The idea behind Independence Realty Trust and Elme Communities 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .