Correlation Between Elme Communities and American Tower

Can any of the company-specific risk be diversified away by investing in both Elme Communities and American Tower 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 Elme Communities and American Tower into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elme Communities and American Tower Corp, you can compare the effects of market volatilities on Elme Communities and American Tower 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 Elme Communities with a short position of American Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elme Communities and American Tower.

Diversification Opportunities for Elme Communities and American Tower

0.77

Correlation Coefficient

Elme Communities  American Tower

Poor diversification

The 3 months correlation between Elme and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Elme Communities and American Tower Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower Corp and Elme Communities 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 Elme Communities are associated (or correlated) with American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower Corp has no effect on the direction of Elme Communities i.e., Elme Communities and American Tower go up and down completely randomly.

Pair Corralation between Elme Communities and American Tower

Given the investment horizon of 90 days Elme Communities is expected to under-perform the American Tower. But the stock apears to be less risky and, when comparing its historical volatility, Elme Communities is 1.07 times less risky than American Tower. The stock trades about -0.21 of its potential returns per unit of risk. The American Tower Corp is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  19,613  in American Tower Corp on October 8, 2024 and sell it today you would lose (1,357) from holding American Tower Corp or give up 6.92% of portfolio value over 90 days.

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

Elme Communities  vs.  American Tower Corp

Elme Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elme Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

American Tower Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Tower Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Elme Communities and American Tower

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

The idea behind Elme Communities and American Tower Corp 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.