Correlation Between Mid America and Sun Communities

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

Diversification Opportunities for Mid America and Sun Communities

0.06

Correlation Coefficient

Mid America  Sun Communities

Significant diversification

The 3 months correlation between Mid and Sun is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities 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 Sun Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Communities has no effect on the direction of Mid America i.e., Mid America and Sun Communities go up and down completely randomly.

Pair Corralation between Mid America and Sun Communities

Considering the 90-day investment horizon Mid America Apartment Communities is expected to generate 0.73 times more return on investment than Sun Communities. However, Mid America Apartment Communities is 1.37 times less risky than Sun Communities. It trades about -0.09 of its potential returns per unit of risk. Sun Communities is currently generating about -0.08 per unit of risk. If you would invest  15,852  in Mid America Apartment Communities on September 19, 2024 and sell it today you would lose (245.00) from holding Mid America Apartment Communities or give up 1.55% of portfolio value over 90 days.

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

Mid America Apartment Communit  vs.  Sun Communities

Mid America Apartment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid America Apartment Communities has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Sun Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Mid America and Sun Communities

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

The idea behind Mid America Apartment Communities and Sun 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.