Correlation Between Elme Communities and BRT Realty

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

By analyzing existing cross correlation between Elme Communities and BRT Realty Trust, you can compare the effects of market volatilities on Elme Communities and BRT Realty 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 BRT Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elme Communities and BRT Realty.

Diversification Opportunities for Elme Communities and BRT Realty

-0.16

Correlation Coefficient

Elme Communities  BRT Realty

Good diversification

The 3 months correlation between Elme and BRT is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Elme Communities and BRT Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRT Realty Trust 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 BRT Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRT Realty Trust has no effect on the direction of Elme Communities i.e., Elme Communities and BRT Realty go up and down completely randomly.

Pair Corralation between Elme Communities and BRT Realty

Given the investment horizon of 90 days Elme Communities is expected to under-perform the BRT Realty. But the stock apears to be less risky and, when comparing its historical volatility, Elme Communities is 1.46 times less risky than BRT Realty. The stock trades about -0.04 of its potential returns per unit of risk. The BRT Realty Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,840  in BRT Realty Trust on September 4, 2024 and sell it today you would earn a total of  145.00  from holding BRT Realty Trust or generate 7.88% return on investment over 90 days.

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

Elme Communities  vs.  BRT Realty Trust

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 rather sound primary indicators, Elme Communities is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

BRT Realty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BRT Realty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BRT Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Elme Communities and BRT Realty

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

The idea behind Elme Communities and BRT Realty Trust 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..