Correlation Between Camden Property and Equity Residential

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

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

Diversification Opportunities for Camden Property and Equity Residential

0.93

Correlation Coefficient

Camden Property  Equity Residential

Almost no diversification

The 3 months correlation between Camden and Equity is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Camden Property Trust and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and Camden Property 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 Camden Property Trust are associated (or correlated) with Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Camden Property i.e., Camden Property and Equity Residential go up and down completely randomly.

Pair Corralation between Camden Property and Equity Residential

Considering the 90-day investment horizon Camden Property Trust is expected to generate 1.02 times more return on investment than Equity Residential. However, Camden Property is 1.02 times more volatile than Equity Residential. It trades about 0.02 of its potential returns per unit of risk. Equity Residential is currently generating about 0.0 per unit of risk. If you would invest  12,287  in Camden Property Trust on December 1, 2024 and sell it today you would earn a total of  119.00  from holding Camden Property Trust or generate 0.97% return on investment over 90 days.

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

Camden Property Trust  vs.  Equity Residential

Camden Property Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Camden Property Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Camden Property is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Equity Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Residential has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equity Residential is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Camden Property and Equity Residential

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

The idea behind Camden Property Trust and Equity Residential 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.