Correlation Between Essential Properties and VICI Properties

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

Diversification Opportunities for Essential Properties and VICI Properties

0.62

Correlation Coefficient

Essential Properties  VICI Properties

Poor diversification

The 3 months correlation between Essential and VICI is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and VICI Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VICI 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 VICI Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VICI Properties has no effect on the direction of Essential Properties i.e., Essential Properties and VICI Properties go up and down completely randomly.

Pair Corralation between Essential Properties and VICI Properties

Given the investment horizon of 90 days Essential Properties is expected to generate 1.99 times less return on investment than VICI Properties. In addition to that, Essential Properties is 1.08 times more volatile than VICI Properties. It trades about 0.07 of its total potential returns per unit of risk. VICI Properties is currently generating about 0.15 per unit of volatility. If you would invest  2,862  in VICI Properties on December 29, 2024 and sell it today you would earn a total of  339.00  from holding VICI Properties or generate 11.84% return on investment over 90 days.

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

Essential Properties Realty  vs.  VICI 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

VICI Properties

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VICI Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, VICI Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Essential Properties and VICI Properties

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

The idea behind Essential Properties Realty and VICI 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.