Correlation Between Essential Properties and One Liberty

Can any of the company-specific risk be diversified away by investing in both Essential Properties and One Liberty 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 One Liberty 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 One Liberty Properties, you can compare the effects of market volatilities on Essential Properties and One Liberty 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 One Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Properties and One Liberty.

Diversification Opportunities for Essential Properties and One Liberty

0.3

Correlation Coefficient

Essential Properties  One Liberty

Weak diversification

The 3 months correlation between Essential and One is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and One Liberty Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Liberty Properties 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 One Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Liberty Properties has no effect on the direction of Essential Properties i.e., Essential Properties and One Liberty go up and down completely randomly.

Pair Corralation between Essential Properties and One Liberty

Given the investment horizon of 90 days Essential Properties Realty is expected to generate 1.02 times more return on investment than One Liberty. However, Essential Properties is 1.02 times more volatile than One Liberty Properties. It trades about 0.07 of its potential returns per unit of risk. One Liberty Properties is currently generating about -0.02 per unit of risk. If you would invest  3,092  in Essential Properties Realty on December 28, 2024 and sell it today you would earn a total of  168.00  from holding Essential Properties Realty or generate 5.43% 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.  One Liberty Properties

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

One Liberty Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days One Liberty Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, One Liberty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Essential Properties and One Liberty

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

The idea behind Essential Properties Realty and One Liberty Properties 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.