Correlation Between Equity Lifestyle and Elme Communities

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Can any of the company-specific risk be diversified away by investing in both Equity Lifestyle and Elme Communities 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 Equity Lifestyle and Elme Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Lifestyle Properties and Elme Communities, you can compare the effects of market volatilities on Equity Lifestyle and Elme Communities 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 Equity Lifestyle with a short position of Elme Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Lifestyle and Elme Communities.

Diversification Opportunities for Equity Lifestyle and Elme Communities

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Equity and Elme is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Equity Lifestyle Properties and Elme Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elme Communities and Equity Lifestyle 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 Equity Lifestyle Properties are associated (or correlated) with Elme Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elme Communities has no effect on the direction of Equity Lifestyle i.e., Equity Lifestyle and Elme Communities go up and down completely randomly.

Pair Corralation between Equity Lifestyle and Elme Communities

Considering the 90-day investment horizon Equity Lifestyle Properties is expected to generate 0.9 times more return on investment than Elme Communities. However, Equity Lifestyle Properties is 1.11 times less risky than Elme Communities. It trades about -0.08 of its potential returns per unit of risk. Elme Communities is currently generating about -0.14 per unit of risk. If you would invest  7,308  in Equity Lifestyle Properties on September 19, 2024 and sell it today you would lose (433.00) from holding Equity Lifestyle Properties or give up 5.93% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Equity Lifestyle Properties  vs.  Elme Communities

 Performance 
       Timeline  
Equity Lifestyle Pro 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Equity Lifestyle Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Equity Lifestyle is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Elme Communities 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 uncertain 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.

Equity Lifestyle and Elme Communities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Equity Lifestyle and Elme Communities

The main advantage of trading using opposite Equity Lifestyle and Elme Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Lifestyle position performs unexpectedly, Elme Communities 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 Elme Communities will offset losses from the drop in Elme Communities' long position.
The idea behind Equity Lifestyle Properties and Elme Communities 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.
Check out your portfolio center.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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