Correlation Between EPR Properties and Farmland Partners

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

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

Diversification Opportunities for EPR Properties and Farmland Partners

-0.59

Correlation Coefficient

EPR Properties  Farmland Partners

Excellent diversification

The 3 months correlation between EPR and Farmland is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding EPR Properties and Farmland Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmland Partners 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 Farmland Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmland Partners has no effect on the direction of EPR Properties i.e., EPR Properties and Farmland Partners go up and down completely randomly.

Pair Corralation between EPR Properties and Farmland Partners

Assuming the 90 days trading horizon EPR Properties is expected to under-perform the Farmland Partners. But the preferred stock apears to be less risky and, when comparing its historical volatility, EPR Properties is 1.43 times less risky than Farmland Partners. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Farmland Partners is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,146  in Farmland Partners on November 29, 2024 and sell it today you would earn a total of  5.00  from holding Farmland Partners or generate 0.44% return on investment over 90 days.

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

EPR Properties  vs.  Farmland Partners

EPR Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days EPR Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EPR Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Farmland Partners

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Farmland Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Farmland Partners is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with EPR Properties and Farmland Partners

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

The idea behind EPR Properties and Farmland Partners 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.