Correlation Between Sun Communities and Essex Property

Can any of the company-specific risk be diversified away by investing in both Sun Communities 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 Sun Communities and Essex Property into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sun Communities and Essex Property Trust, you can compare the effects of market volatilities on Sun Communities 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 Sun Communities with a short position of Essex Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Communities and Essex Property.

Diversification Opportunities for Sun Communities and Essex Property

0.35

Correlation Coefficient

Sun Communities  Essex Property

Weak diversification

The 3 months correlation between Sun and Essex is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sun Communities 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 Sun Communities 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 Sun 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 Sun Communities i.e., Sun Communities and Essex Property go up and down completely randomly.

Pair Corralation between Sun Communities and Essex Property

Assuming the 90 days trading horizon Sun Communities is expected to under-perform the Essex Property. In addition to that, Sun Communities is 1.26 times more volatile than Essex Property Trust. It trades about -0.01 of its total potential returns per unit of risk. Essex Property Trust is currently generating about 0.04 per unit of volatility. If you would invest  17,037  in Essex Property Trust on September 23, 2024 and sell it today you would earn a total of  530.00  from holding Essex Property Trust or generate 3.11% return on investment over 90 days.

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

Sun Communities  vs.  Essex Property Trust

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 somewhat strong basic indicators, Sun Communities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Essex Property Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Essex Property Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Essex Property is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sun Communities and Essex Property

The main advantage of trading using opposite Sun Communities and Essex Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Communities 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.

The idea behind Sun Communities and Essex Property Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.