Correlation Between Safehold and Essential Properties

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

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

Diversification Opportunities for Safehold and Essential Properties

0.06

Correlation Coefficient

Safehold  Essential Properties

Significant diversification

The 3 months correlation between Safehold and Essential is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Safehold and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties and Safehold 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 Safehold 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 Safehold i.e., Safehold and Essential Properties go up and down completely randomly.

Pair Corralation between Safehold and Essential Properties

Given the investment horizon of 90 days Safehold is expected to under-perform the Essential Properties. In addition to that, Safehold is 1.7 times more volatile than Essential Properties Realty. It trades about -0.1 of its total potential returns per unit of risk. Essential Properties Realty is currently generating about 0.11 per unit of volatility. If you would invest  3,168  in Essential Properties Realty on September 2, 2024 and sell it today you would earn a total of  242.00  from holding Essential Properties Realty or generate 7.64% return on investment over 90 days.

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

Safehold  vs.  Essential Properties Realty

Safehold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safehold 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.

Essential Properties

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Essential Properties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Safehold and Essential Properties

The main advantage of trading using opposite Safehold and Essential Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safehold 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 Safehold 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.