Correlation Between Mid America and Apartment Income

Can any of the company-specific risk be diversified away by investing in both Mid America and Apartment Income 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 Apartment Income 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 Apartment Income REIT, you can compare the effects of market volatilities on Mid America and Apartment Income 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 Apartment Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid America and Apartment Income.

Diversification Opportunities for Mid America and Apartment Income

-0.25

Correlation Coefficient

Mid America  Apartment Income

Very good diversification

The 3 months correlation between Mid and Apartment is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and Apartment Income REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Income REIT 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 Apartment Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Income REIT has no effect on the direction of Mid America i.e., Mid America and Apartment Income go up and down completely randomly.

Pair Corralation between Mid America and Apartment Income

Considering the 90-day investment horizon Mid America is expected to generate 1.84 times less return on investment than Apartment Income. But when comparing it to its historical volatility, Mid America Apartment Communities is 1.31 times less risky than Apartment Income. It trades about 0.02 of its potential returns per unit of risk. Apartment Income REIT is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,440  in Apartment Income REIT on September 2, 2024 and sell it today you would earn a total of  468.00  from holding Apartment Income REIT or generate 13.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.23%
Values	Daily Returns

Mid America Apartment Communit  vs.  Apartment Income REIT

Mid America Apartment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid America Apartment Communities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mid America is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Apartment Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mid America and Apartment Income

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

The idea behind Mid America Apartment Communities and Apartment Income REIT 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.