Correlation Between Farmland Partners and EPR Properties

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

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

Diversification Opportunities for Farmland Partners and EPR Properties

-0.59

Correlation Coefficient

Farmland Partners  EPR Properties

Excellent diversification

The 3 months correlation between Farmland and EPR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Farmland Partners and EPR Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPR Properties and Farmland Partners 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 Farmland Partners are associated (or correlated) with EPR Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPR Properties has no effect on the direction of Farmland Partners i.e., Farmland Partners and EPR Properties go up and down completely randomly.

Pair Corralation between Farmland Partners and EPR Properties

Considering the 90-day investment horizon Farmland Partners is expected to generate 1.7 times more return on investment than EPR Properties. However, Farmland Partners is 1.7 times more volatile than EPR Properties. It trades about 0.24 of its potential returns per unit of risk. EPR Properties is currently generating about -0.01 per unit of risk. If you would invest  1,012  in Farmland Partners on August 31, 2024 and sell it today you would earn a total of  254.00  from holding Farmland Partners or generate 25.1% return on investment over 90 days.

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

Farmland Partners  vs.  EPR Properties

Farmland Partners

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Farmland Partners are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Farmland Partners demonstrated solid returns over the last few months and may actually be approaching a breakup point.

EPR Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EPR Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, EPR Properties is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Farmland Partners and EPR Properties

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

The idea behind Farmland Partners and EPR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.