Correlation Between EPR Properties and Power REIT

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

By analyzing existing cross correlation between EPR Properties and Power REIT, you can compare the effects of market volatilities on EPR Properties and Power REIT 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 EPR Properties with a short position of Power REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of EPR Properties and Power REIT.

Diversification Opportunities for EPR Properties and Power REIT

-0.2

Correlation Coefficient

EPR Properties  Power REIT

Good diversification

The 3 months correlation between EPR and Power is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding EPR Properties and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT and EPR Properties 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 EPR Properties are associated (or correlated) with Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT has no effect on the direction of EPR Properties i.e., EPR Properties and Power REIT go up and down completely randomly.

Pair Corralation between EPR Properties and Power REIT

Assuming the 90 days trading horizon EPR Properties is expected to under-perform the Power REIT. But the preferred stock apears to be less risky and, when comparing its historical volatility, EPR Properties is 17.66 times less risky than Power REIT. The preferred stock trades about -0.14 of its potential returns per unit of risk. The Power REIT is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  107.00  in Power REIT on September 25, 2024 and sell it today you would earn a total of  19.00  from holding Power REIT or generate 17.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

EPR Properties  vs.  Power REIT

EPR Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EPR Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, EPR Properties is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Power REIT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EPR Properties and Power REIT

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

The idea behind EPR Properties and Power REIT 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.