Correlation Between Elme Communities and Equinix

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

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

Diversification Opportunities for Elme Communities and Equinix

-0.46

Correlation Coefficient

Elme Communities  Equinix

Very good diversification

The 3 months correlation between Elme and Equinix is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Elme Communities and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Elme Communities i.e., Elme Communities and Equinix go up and down completely randomly.

Pair Corralation between Elme Communities and Equinix

Given the investment horizon of 90 days Elme Communities is expected to generate 12.62 times less return on investment than Equinix. In addition to that, Elme Communities is 1.14 times more volatile than Equinix. It trades about 0.02 of its total potential returns per unit of risk. Equinix is currently generating about 0.29 per unit of volatility. If you would invest  90,380  in Equinix on September 1, 2024 and sell it today you would earn a total of  7,768  from holding Equinix or generate 8.59% return on investment over 90 days.

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

Elme Communities  vs.  Equinix

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.

Equinix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Equinix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elme Communities and Equinix

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

The idea behind Elme Communities and Equinix 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.