Correlation Between Essential Properties and Vanguard Reit

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

Diversification Opportunities for Essential Properties and Vanguard Reit

0.53

Correlation Coefficient

Essential Properties  Vanguard Reit

Very weak diversification

The 3 months correlation between Essential and Vanguard is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and Vanguard Reit Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Reit Index 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 Vanguard Reit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Reit Index has no effect on the direction of Essential Properties i.e., Essential Properties and Vanguard Reit go up and down completely randomly.

Pair Corralation between Essential Properties and Vanguard Reit

Given the investment horizon of 90 days Essential Properties Realty is expected to generate 1.3 times more return on investment than Vanguard Reit. However, Essential Properties is 1.3 times more volatile than Vanguard Reit Index. It trades about 0.03 of its potential returns per unit of risk. Vanguard Reit Index is currently generating about 0.04 per unit of risk. If you would invest  3,167  in Essential Properties Realty on December 26, 2024 and sell it today you would earn a total of  73.00  from holding Essential Properties Realty or generate 2.31% return on investment over 90 days.

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

Essential Properties Realty  vs.  Vanguard Reit Index

Essential Properties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 2 (%) 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.

Vanguard Reit Index

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Reit Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Vanguard Reit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Essential Properties and Vanguard Reit

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

The idea behind Essential Properties Realty and Vanguard Reit Index 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..