Correlation Between Independence Realty and Urban Edge

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

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

Diversification Opportunities for Independence Realty and Urban Edge

0.76

Correlation Coefficient

Independence Realty  Urban Edge

Poor diversification

The 3 months correlation between Independence and Urban is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust and Urban Edge Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Edge Properties and Independence Realty 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 Independence Realty Trust are associated (or correlated) with Urban Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urban Edge Properties has no effect on the direction of Independence Realty i.e., Independence Realty and Urban Edge go up and down completely randomly.

Pair Corralation between Independence Realty and Urban Edge

Considering the 90-day investment horizon Independence Realty Trust is expected to generate 0.98 times more return on investment than Urban Edge. However, Independence Realty Trust is 1.02 times less risky than Urban Edge. It trades about 0.03 of its potential returns per unit of risk. Urban Edge Properties is currently generating about -0.09 per unit of risk. If you would invest  2,131  in Independence Realty Trust on December 2, 2024 and sell it today you would earn a total of  49.00  from holding Independence Realty Trust or generate 2.3% return on investment over 90 days.

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

Independence Realty Trust  vs.  Urban Edge Properties

Independence Realty Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Independence Realty Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Edge Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Independence Realty and Urban Edge

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

The idea behind Independence Realty Trust and Urban Edge 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.