Correlation Between Essential Properties and Modiv

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

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

Diversification Opportunities for Essential Properties and Modiv

0.36

Correlation Coefficient

Essential Properties  Modiv

Weak diversification

The 3 months correlation between Essential and Modiv is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and Modiv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modiv Inc and Essential 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 Essential Properties Realty are associated (or correlated) with Modiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modiv Inc has no effect on the direction of Essential Properties i.e., Essential Properties and Modiv go up and down completely randomly.

Pair Corralation between Essential Properties and Modiv

Given the investment horizon of 90 days Essential Properties is expected to generate 1.46 times less return on investment than Modiv. But when comparing it to its historical volatility, Essential Properties Realty is 1.49 times less risky than Modiv. It trades about 0.07 of its potential returns per unit of risk. Modiv Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,465  in Modiv Inc on December 29, 2024 and sell it today you would earn a total of  111.00  from holding Modiv Inc or generate 7.58% return on investment over 90 days.

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

Essential Properties Realty  vs.  Modiv Inc

Essential Properties

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Essential Properties is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Modiv Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Modiv Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Modiv may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Essential Properties and Modiv

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

The idea behind Essential Properties Realty and Modiv Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.