Correlation Between Dream Residential and UMH Properties

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

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

Diversification Opportunities for Dream Residential and UMH Properties

0.68

Correlation Coefficient

Dream Residential  UMH Properties

Poor diversification

The 3 months correlation between Dream and UMH is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dream Residential Real and UMH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMH Properties and Dream Residential 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 Dream Residential Real are associated (or correlated) with UMH Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMH Properties has no effect on the direction of Dream Residential i.e., Dream Residential and UMH Properties go up and down completely randomly.

Pair Corralation between Dream Residential and UMH Properties

Assuming the 90 days horizon Dream Residential Real is expected to under-perform the UMH Properties. In addition to that, Dream Residential is 3.55 times more volatile than UMH Properties. It trades about -0.06 of its total potential returns per unit of risk. UMH Properties is currently generating about -0.05 per unit of volatility. If you would invest  2,322  in UMH Properties on October 9, 2024 and sell it today you would lose (16.00) from holding UMH Properties or give up 0.69% of portfolio value over 90 days.

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

Dream Residential Real  vs.  UMH Properties

Dream Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

UMH Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UMH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, UMH Properties is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dream Residential and UMH Properties

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

The idea behind Dream Residential Real and UMH 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.