Correlation Between Elme Communities and Clipper Realty

Can any of the company-specific risk be diversified away by investing in both Elme Communities and Clipper 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 Clipper 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 Clipper Realty, you can compare the effects of market volatilities on Elme Communities and Clipper 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 Clipper Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elme Communities and Clipper Realty.

Diversification Opportunities for Elme Communities and Clipper Realty

0.68

Correlation Coefficient

Elme Communities  Clipper Realty

Poor diversification

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

Pair Corralation between Elme Communities and Clipper Realty

Given the investment horizon of 90 days Elme Communities is expected to generate 0.45 times more return on investment than Clipper Realty. However, Elme Communities is 2.22 times less risky than Clipper Realty. It trades about -0.01 of its potential returns per unit of risk. Clipper Realty is currently generating about -0.01 per unit of risk. If you would invest  1,748  in Elme Communities on October 22, 2024 and sell it today you would lose (266.00) from holding Elme Communities or give up 15.22% 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.  Clipper Realty

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.

Clipper Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clipper Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Elme Communities and Clipper Realty

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

The idea behind Elme Communities and Clipper 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.