Correlation Between Urban Edge and Equinix

Can any of the company-specific risk be diversified away by investing in both Urban Edge and Equinix 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 Equinix 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 Equinix, you can compare the effects of market volatilities on Urban Edge and Equinix 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 Equinix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Edge and Equinix.

Diversification Opportunities for Urban Edge and Equinix

0.83

Correlation Coefficient

Urban Edge  Equinix

Very poor diversification

The 3 months correlation between Urban and Equinix is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Urban Edge i.e., Urban Edge and Equinix go up and down completely randomly.

Pair Corralation between Urban Edge and Equinix

Allowing for the 90-day total investment horizon Urban Edge is expected to generate 1.06 times less return on investment than Equinix. But when comparing it to its historical volatility, Urban Edge Properties is 1.07 times less risky than Equinix. It trades about 0.18 of its potential returns per unit of risk. Equinix is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  74,408  in Equinix on September 1, 2024 and sell it today you would earn a total of  23,740  from holding Equinix or generate 31.91% return on investment over 90 days.

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

Urban Edge Properties  vs.  Equinix

Urban Edge Properties

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Edge Properties are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Urban Edge may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Equinix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Equinix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Urban Edge and Equinix

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

The idea behind Urban Edge Properties and Equinix 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.