Correlation Between Newlake Capital and EPR Properties

Can any of the company-specific risk be diversified away by investing in both Newlake Capital and EPR Properties 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 Newlake Capital and EPR Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Newlake Capital Partners and EPR Properties, you can compare the effects of market volatilities on Newlake Capital and EPR Properties 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 Newlake Capital with a short position of EPR Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newlake Capital and EPR Properties.

Diversification Opportunities for Newlake Capital and EPR Properties

0.64

Correlation Coefficient

Newlake Capital  EPR Properties

Poor diversification

The 3 months correlation between Newlake and EPR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Newlake Capital Partners and EPR Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPR Properties and Newlake Capital 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 Newlake Capital Partners are associated (or correlated) with EPR Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPR Properties has no effect on the direction of Newlake Capital i.e., Newlake Capital and EPR Properties go up and down completely randomly.

Pair Corralation between Newlake Capital and EPR Properties

Given the investment horizon of 90 days Newlake Capital Partners is expected to under-perform the EPR Properties. In addition to that, Newlake Capital is 1.9 times more volatile than EPR Properties. It trades about -0.03 of its total potential returns per unit of risk. EPR Properties is currently generating about 0.08 per unit of volatility. If you would invest  2,191  in EPR Properties on September 1, 2024 and sell it today you would earn a total of  34.00  from holding EPR Properties or generate 1.55% return on investment over 90 days.

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

Newlake Capital Partners  vs.  EPR Properties

Newlake Capital Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Newlake Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

EPR Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EPR Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EPR Properties is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Newlake Capital and EPR Properties

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

The idea behind Newlake Capital Partners and EPR Properties 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.