Correlation Between Power REIT and EPR Properties

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

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

Diversification Opportunities for Power REIT and EPR Properties

0.73

Correlation Coefficient

Power REIT  EPR Properties

Poor diversification

The 3 months correlation between Power and EPR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT PFD and EPR Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPR Properties and Power REIT 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 Power REIT PFD 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 Power REIT i.e., Power REIT and EPR Properties go up and down completely randomly.

Pair Corralation between Power REIT and EPR Properties

Assuming the 90 days horizon Power REIT PFD is expected to generate 7.86 times more return on investment than EPR Properties. However, Power REIT is 7.86 times more volatile than EPR Properties. It trades about 0.07 of its potential returns per unit of risk. EPR Properties is currently generating about 0.18 per unit of risk. If you would invest  350.00  in Power REIT PFD on December 28, 2024 and sell it today you would earn a total of  50.00  from holding Power REIT PFD or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.67%
Values	Daily Returns

Power REIT PFD  vs.  EPR Properties

Power REIT PFD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT PFD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Power REIT sustained solid returns over the last few months and may actually be approaching a breakup point.

EPR Properties

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EPR Properties are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, EPR Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Power REIT and EPR Properties

The main advantage of trading using opposite Power REIT and EPR Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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 Power REIT PFD 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.