Correlation Between AFC Gamma and EPR Properties

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

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

Diversification Opportunities for AFC Gamma and EPR Properties

0.86

Correlation Coefficient

AFC Gamma  EPR Properties

Very poor diversification

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

Pair Corralation between AFC Gamma and EPR Properties

Given the investment horizon of 90 days AFC Gamma is expected to under-perform the EPR Properties. In addition to that, AFC Gamma is 1.52 times more volatile than EPR Properties. It trades about -0.09 of its total potential returns per unit of risk. EPR Properties is currently generating about -0.06 per unit of volatility. If you would invest  2,186  in EPR Properties on November 29, 2024 and sell it today you would lose (106.00) from holding EPR Properties or give up 4.85% of portfolio value over 90 days.

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

AFC Gamma  vs.  EPR Properties

AFC Gamma

Risk-Adjusted Performance

Very Weak

Over the last 90 days AFC Gamma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

EPR Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days EPR Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EPR Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AFC Gamma and EPR Properties

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

The idea behind AFC Gamma and EPR Properties 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.