Correlation Between Urban Edge and Equity Commonwealth

Can any of the company-specific risk be diversified away by investing in both Urban Edge and Equity Commonwealth 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 Urban Edge and Equity Commonwealth into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Urban Edge and Equity Commonwealth

0.87

Correlation Coefficient

Urban Edge  Equity Commonwealth

Very poor diversification

The 3 months correlation between Urban and Equity is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth and Urban Edge 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 Urban Edge Properties are associated (or correlated) with Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of Urban Edge i.e., Urban Edge and Equity Commonwealth go up and down completely randomly.

Pair Corralation between Urban Edge and Equity Commonwealth

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to generate 3.74 times more return on investment than Equity Commonwealth. However, Urban Edge is 3.74 times more volatile than Equity Commonwealth. It trades about 0.11 of its potential returns per unit of risk. Equity Commonwealth is currently generating about 0.08 per unit of risk. If you would invest  1,664  in Urban Edge Properties on September 4, 2024 and sell it today you would earn a total of  610.00  from holding Urban Edge Properties or generate 36.66% return on investment over 90 days.

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

Urban Edge Properties  vs.  Equity Commonwealth

Urban Edge Properties

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Edge Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Urban Edge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Equity Commonwealth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Commonwealth are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Equity Commonwealth is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Urban Edge and Equity Commonwealth

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

The idea behind Urban Edge Properties and Equity Commonwealth 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.