Correlation Between AvalonBay Communities and A1TM34
Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities and A1TM34 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 A1TM34 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AvalonBay Communities and A1TM34, you can compare the effects of market volatilities on AvalonBay Communities and A1TM34 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 A1TM34. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and A1TM34.
Diversification Opportunities for AvalonBay Communities and A1TM34
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AvalonBay and A1TM34 is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and A1TM34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1TM34 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 A1TM34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1TM34 has no effect on the direction of AvalonBay Communities i.e., AvalonBay Communities and A1TM34 go up and down completely randomly.
Pair Corralation between AvalonBay Communities and A1TM34
Assuming the 90 days trading horizon AvalonBay Communities is expected to generate 1.9 times more return on investment than A1TM34. However, AvalonBay Communities is 1.9 times more volatile than A1TM34. It trades about 0.06 of its potential returns per unit of risk. A1TM34 is currently generating about 0.08 per unit of risk. If you would invest 21,315 in AvalonBay Communities on September 23, 2024 and sell it today you would earn a total of 12,609 from holding AvalonBay Communities or generate 59.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 89.11% |
Values | Daily Returns |
AvalonBay Communities vs. A1TM34
Performance |
Timeline |
AvalonBay Communities |
A1TM34 |
AvalonBay Communities and A1TM34 Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AvalonBay Communities and A1TM34
The main advantage of trading using opposite AvalonBay Communities and A1TM34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities position performs unexpectedly, A1TM34 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 A1TM34 will offset losses from the drop in A1TM34's long position.AvalonBay Communities vs. Equity Residential | AvalonBay Communities vs. Mid America Apartment Communities | AvalonBay Communities vs. Sun Communities | AvalonBay Communities vs. Essex Property Trust |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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