Correlation Between Modiv and Essential Properties

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

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

Diversification Opportunities for Modiv and Essential Properties

0.36

Correlation Coefficient

Modiv  Essential Properties

Weak diversification

The 3 months correlation between Modiv and Essential is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Modiv Inc and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and Modiv 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 Modiv Inc are associated (or correlated) with Essential Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Properties has no effect on the direction of Modiv i.e., Modiv and Essential Properties go up and down completely randomly.

Pair Corralation between Modiv and Essential Properties

Considering the 90-day investment horizon Modiv Inc is expected to generate 1.49 times more return on investment than Essential Properties. However, Modiv is 1.49 times more volatile than Essential Properties Realty. It trades about 0.07 of its potential returns per unit of risk. Essential Properties Realty is currently generating about 0.07 per unit of risk. If you would invest  1,465  in Modiv Inc on December 29, 2024 and sell it today you would earn a total of  111.00  from holding Modiv Inc or generate 7.58% return on investment over 90 days.

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

Modiv Inc  vs.  Essential Properties Realty

Modiv Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Modiv Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Modiv may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Modiv and Essential Properties

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

The idea behind Modiv Inc and Essential Properties Realty 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.