Correlation Between Alexandria Real and Essential Properties

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

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

Diversification Opportunities for Alexandria Real and Essential Properties

0.22

Correlation Coefficient

Alexandria Real  Essential Properties

Modest diversification

The 3 months correlation between Alexandria and Essential is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and Alexandria Real 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 Alexandria Real Estate 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 Alexandria Real i.e., Alexandria Real and Essential Properties go up and down completely randomly.

Pair Corralation between Alexandria Real and Essential Properties

Considering the 90-day investment horizon Alexandria Real Estate is expected to under-perform the Essential Properties. In addition to that, Alexandria Real is 1.26 times more volatile than Essential Properties Realty. It trades about -0.19 of its total potential returns per unit of risk. Essential Properties Realty is currently generating about 0.01 per unit of volatility. If you would invest  3,288  in Essential Properties Realty on September 17, 2024 and sell it today you would earn a total of  2.00  from holding Essential Properties Realty or generate 0.06% return on investment over 90 days.

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

Alexandria Real Estate  vs.  Essential Properties Realty

Alexandria Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alexandria Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Essential Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essential Properties Realty has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Alexandria Real and Essential Properties

The main advantage of trading using opposite Alexandria Real and Essential Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alexandria Real 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 Alexandria Real Estate 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.