Correlation Between Sun Communities and Dream Residential

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

By analyzing existing cross correlation between Sun Communities and Dream Residential Real, you can compare the effects of market volatilities on Sun Communities and Dream Residential 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 Sun Communities with a short position of Dream Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Communities and Dream Residential.

Diversification Opportunities for Sun Communities and Dream Residential

0.77

Correlation Coefficient

Sun Communities  Dream Residential

Poor diversification

The 3 months correlation between Sun and Dream is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sun Communities and Dream Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Residential Real and Sun Communities 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 Sun Communities are associated (or correlated) with Dream Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Residential Real has no effect on the direction of Sun Communities i.e., Sun Communities and Dream Residential go up and down completely randomly.

Pair Corralation between Sun Communities and Dream Residential

Considering the 90-day investment horizon Sun Communities is expected to generate 2.46 times less return on investment than Dream Residential. But when comparing it to its historical volatility, Sun Communities is 1.69 times less risky than Dream Residential. It trades about 0.12 of its potential returns per unit of risk. Dream Residential Real is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  642.00  in Dream Residential Real on December 19, 2024 and sell it today you would earn a total of  203.00  from holding Dream Residential Real or generate 31.62% return on investment over 90 days.

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

Sun Communities  vs.  Dream Residential Real

Sun Communities

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Communities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Sun Communities demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Dream Residential Real

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Residential Real are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Dream Residential reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Communities and Dream Residential

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

The idea behind Sun Communities and Dream Residential Real 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.