Correlation Between Armada Hoffler and Essential Properties

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

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

Diversification Opportunities for Armada Hoffler and Essential Properties

0.32

Correlation Coefficient

Armada Hoffler  Essential Properties

Weak diversification

The 3 months correlation between Armada and Essential is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hoffler Properties and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and Armada Hoffler 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 Armada Hoffler Properties are associated (or correlated) with Essential Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Properties has no effect on the direction of Armada Hoffler i.e., Armada Hoffler and Essential Properties go up and down completely randomly.

Pair Corralation between Armada Hoffler and Essential Properties

Assuming the 90 days trading horizon Armada Hoffler Properties is expected to under-perform the Essential Properties. But the preferred stock apears to be less risky and, when comparing its historical volatility, Armada Hoffler Properties is 2.32 times less risky than Essential Properties. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Essential Properties Realty is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,272  in Essential Properties Realty on December 30, 2024 and sell it today you would lose (12.00) from holding Essential Properties Realty or give up 0.37% of portfolio value over 90 days.

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

Armada Hoffler Properties  vs.  Essential Properties Realty

Armada Hoffler Properties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Armada Hoffler Properties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Armada Hoffler is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Essential Properties

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Essential Properties is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Armada Hoffler and Essential Properties

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

The idea behind Armada Hoffler Properties and Essential Properties Realty 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..