Correlation Between Mid America and BRT Realty

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

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

Diversification Opportunities for Mid America and BRT Realty

-0.2

Correlation Coefficient

Mid America  BRT Realty

Good diversification

The 3 months correlation between Mid and BRT is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and BRT Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRT Realty Trust and Mid America 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 Mid America Apartment Communities are associated (or correlated) with BRT Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRT Realty Trust has no effect on the direction of Mid America i.e., Mid America and BRT Realty go up and down completely randomly.

Pair Corralation between Mid America and BRT Realty

Assuming the 90 days trading horizon Mid America Apartment Communities is expected to generate 0.8 times more return on investment than BRT Realty. However, Mid America Apartment Communities is 1.25 times less risky than BRT Realty. It trades about -0.03 of its potential returns per unit of risk. BRT Realty Trust is currently generating about -0.1 per unit of risk. If you would invest  5,744  in Mid America Apartment Communities on November 29, 2024 and sell it today you would lose (145.00) from holding Mid America Apartment Communities or give up 2.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Mid America Apartment Communit  vs.  BRT Realty Trust

Mid America Apartment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid America Apartment Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Mid America is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

BRT Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRT Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Mid America and BRT Realty

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

The idea behind Mid America Apartment Communities and BRT Realty 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.