Correlation Between Urban Edge and Elme Communities

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

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

Diversification Opportunities for Urban Edge and Elme Communities

-0.5

Correlation Coefficient

Urban Edge  Elme Communities

Very good diversification

The 3 months correlation between Urban and Elme is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Elme Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elme Communities and Urban Edge 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 Urban Edge Properties are associated (or correlated) with Elme Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elme Communities has no effect on the direction of Urban Edge i.e., Urban Edge and Elme Communities go up and down completely randomly.

Pair Corralation between Urban Edge and Elme Communities

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to under-perform the Elme Communities. But the stock apears to be less risky and, when comparing its historical volatility, Urban Edge Properties is 1.26 times less risky than Elme Communities. The stock trades about -0.11 of its potential returns per unit of risk. The Elme Communities is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,470  in Elme Communities on December 27, 2024 and sell it today you would earn a total of  266.00  from holding Elme Communities or generate 18.1% return on investment over 90 days.

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

Urban Edge Properties  vs.  Elme Communities

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Edge Properties 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.

Elme Communities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elme Communities are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Elme Communities exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Urban Edge and Elme Communities

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

The idea behind Urban Edge Properties and Elme Communities 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.