Correlation Between Mid America and Essex Property
Can any of the company-specific risk be diversified away by investing in both Mid America and Essex Property 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 Mid America and Essex Property into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid America Apartment Communities and Essex Property Trust, you can compare the effects of market volatilities on Mid America and Essex Property 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 Mid America with a short position of Essex Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid America and Essex Property.
Diversification Opportunities for Mid America and Essex Property
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mid and Essex is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and Essex Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Property Trust and Mid America 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 Mid America Apartment Communities are associated (or correlated) with Essex Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Property Trust has no effect on the direction of Mid America i.e., Mid America and Essex Property go up and down completely randomly.
Pair Corralation between Mid America and Essex Property
Assuming the 90 days horizon Mid America Apartment Communities is expected to generate 0.94 times more return on investment than Essex Property. However, Mid America Apartment Communities is 1.06 times less risky than Essex Property. It trades about 0.11 of its potential returns per unit of risk. Essex Property Trust is currently generating about 0.09 per unit of risk. If you would invest 11,899 in Mid America Apartment Communities on September 24, 2024 and sell it today you would earn a total of 2,851 from holding Mid America Apartment Communities or generate 23.96% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Mid America Apartment Communit vs. Essex Property Trust
Performance |
Timeline |
Mid America Apartment |
Essex Property Trust |
Mid America and Essex Property Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mid America and Essex Property
The main advantage of trading using opposite Mid America and Essex Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid America position performs unexpectedly, Essex Property 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 Essex Property will offset losses from the drop in Essex Property's long position.Mid America vs. X FAB Silicon Foundries | Mid America vs. Casio Computer CoLtd | Mid America vs. Penta Ocean Construction Co | Mid America vs. Vishay Intertechnology |
Essex Property vs. Equity Residential | Essex Property vs. AvalonBay Communities | Essex Property vs. UDR Inc | Essex Property 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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