Correlation Between EPR Properties and Lexington Realty

Can any of the company-specific risk be diversified away by investing in both EPR Properties and Lexington 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 EPR Properties and Lexington Realty 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 Lexington Realty Trust, you can compare the effects of market volatilities on EPR Properties and Lexington 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 EPR Properties with a short position of Lexington Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of EPR Properties and Lexington Realty.

Diversification Opportunities for EPR Properties and Lexington Realty

0.18

Correlation Coefficient

EPR Properties  Lexington Realty

Average diversification

The 3 months correlation between EPR and Lexington is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding EPR Properties Series and Lexington Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexington Realty Trust 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 Lexington Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexington Realty Trust has no effect on the direction of EPR Properties i.e., EPR Properties and Lexington Realty go up and down completely randomly.

Pair Corralation between EPR Properties and Lexington Realty

Assuming the 90 days trading horizon EPR Properties Series is expected to generate 1.46 times more return on investment than Lexington Realty. However, EPR Properties is 1.46 times more volatile than Lexington Realty Trust. It trades about 0.13 of its potential returns per unit of risk. Lexington Realty Trust is currently generating about -0.01 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

EPR Properties Series  vs.  Lexington Realty Trust

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.

Lexington Realty Trust

Risk-Adjusted Performance

Very Weak

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

Pair Trading with EPR Properties and Lexington Realty

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

The idea behind EPR Properties Series and Lexington Realty Trust 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.