Correlation Between Essex Property and Camden Property

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

By analyzing existing cross correlation between Essex Property Trust and Camden Property Trust, you can compare the effects of market volatilities on Essex Property and Camden Property 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 Essex Property with a short position of Camden Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essex Property and Camden Property.

Diversification Opportunities for Essex Property and Camden Property

0.84

Correlation Coefficient

Essex Property  Camden Property

Very poor diversification

The 3 months correlation between Essex and Camden is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Essex Property Trust and Camden Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camden Property Trust and Essex Property 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 Essex Property Trust are associated (or correlated) with Camden Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camden Property Trust has no effect on the direction of Essex Property i.e., Essex Property and Camden Property go up and down completely randomly.

Pair Corralation between Essex Property and Camden Property

Considering the 90-day investment horizon Essex Property Trust is expected to generate 1.05 times more return on investment than Camden Property. However, Essex Property is 1.05 times more volatile than Camden Property Trust. It trades about 0.11 of its potential returns per unit of risk. Camden Property Trust is currently generating about 0.07 per unit of risk. If you would invest  28,199  in Essex Property Trust on December 27, 2024 and sell it today you would earn a total of  2,424  from holding Essex Property Trust or generate 8.6% return on investment over 90 days.

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

Essex Property Trust  vs.  Camden Property Trust

Essex Property Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essex Property Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Essex Property may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Camden Property Trust

Risk-Adjusted Performance

Modest

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

Pair Trading with Essex Property and Camden Property

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

The idea behind Essex Property Trust and Camden Property Trust 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..