Correlation Between EPR Properties and High-yield Municipal

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

By analyzing existing cross correlation between EPR Properties Series and High Yield Municipal Fund, you can compare the effects of market volatilities on EPR Properties and High-yield Municipal 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 High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of EPR Properties and High-yield Municipal.

Diversification Opportunities for EPR Properties and High-yield Municipal

0.63

Correlation Coefficient

EPR Properties  High-yield Municipal

Poor diversification

The 3 months correlation between EPR and High-yield is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding EPR Properties Series and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal 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 Series are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of EPR Properties i.e., EPR Properties and High-yield Municipal go up and down completely randomly.

Pair Corralation between EPR Properties and High-yield Municipal

Assuming the 90 days trading horizon EPR Properties Series is expected to generate 4.31 times more return on investment than High-yield Municipal. However, EPR Properties is 4.31 times more volatile than High Yield Municipal Fund. It trades about 0.13 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about -0.03 per unit of risk. If you would invest  2,754  in EPR Properties Series on December 30, 2024 and sell it today you would earn a total of  256.00  from holding EPR Properties Series or generate 9.3% return on investment over 90 days.

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

EPR Properties Series  vs.  High Yield Municipal Fund

EPR Properties Series

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EPR Properties Series are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, EPR Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

High Yield Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EPR Properties and High-yield Municipal

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

The idea behind EPR Properties Series and High Yield Municipal Fund 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..