Correlation Between AvalonBay Communities and AMETEK,

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

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

Diversification Opportunities for AvalonBay Communities and AMETEK,

0.86

Correlation Coefficient

AvalonBay Communities  AMETEK,

Very poor diversification

The 3 months correlation between AvalonBay and AMETEK, is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and AMETEK, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMETEK, and AvalonBay 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 AvalonBay Communities are associated (or correlated) with AMETEK,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMETEK, has no effect on the direction of AvalonBay Communities i.e., AvalonBay Communities and AMETEK, go up and down completely randomly.

Pair Corralation between AvalonBay Communities and AMETEK,

Assuming the 90 days trading horizon AvalonBay Communities is expected to generate 1.2 times more return on investment than AMETEK,. However, AvalonBay Communities is 1.2 times more volatile than AMETEK,. It trades about 0.05 of its potential returns per unit of risk. AMETEK, is currently generating about 0.06 per unit of risk. If you would invest  21,934  in AvalonBay Communities on October 13, 2024 and sell it today you would earn a total of  10,098  from holding AvalonBay Communities or generate 46.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	89.0%
Values	Daily Returns

AvalonBay Communities  vs.  AMETEK,

AvalonBay Communities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AvalonBay Communities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AvalonBay Communities may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AMETEK,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AMETEK, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, AMETEK, sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AvalonBay Communities and AMETEK,

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

The idea behind AvalonBay Communities and AMETEK, 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .