Correlation Between One Liberty and Essential Properties

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

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

Diversification Opportunities for One Liberty and Essential Properties

0.62

Correlation Coefficient

One Liberty  Essential Properties

Poor diversification

The 3 months correlation between One and Essential is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding One Liberty Properties and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and One Liberty 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 One Liberty Properties are associated (or correlated) with Essential Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Properties has no effect on the direction of One Liberty i.e., One Liberty and Essential Properties go up and down completely randomly.

Pair Corralation between One Liberty and Essential Properties

Considering the 90-day investment horizon One Liberty Properties is expected to generate 1.24 times more return on investment than Essential Properties. However, One Liberty is 1.24 times more volatile than Essential Properties Realty. It trades about 0.17 of its potential returns per unit of risk. Essential Properties Realty is currently generating about 0.12 per unit of risk. If you would invest  2,632  in One Liberty Properties on August 30, 2024 and sell it today you would earn a total of  383.00  from holding One Liberty Properties or generate 14.55% return on investment over 90 days.

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

One Liberty Properties  vs.  Essential Properties Realty

One Liberty Properties

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in One Liberty Properties are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, One Liberty reported solid returns over the last few months and may actually be approaching a breakup point.

Essential Properties

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Essential Properties may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with One Liberty and Essential Properties

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

The idea behind One Liberty Properties and Essential Properties Realty 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.