Correlation Between Urban Edge and UDR

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

Diversification Opportunities for Urban Edge and UDR

0.7

Correlation Coefficient

Urban Edge  UDR

Poor diversification

The 3 months correlation between Urban and UDR is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and UDR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UDR Inc 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 UDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UDR Inc has no effect on the direction of Urban Edge i.e., Urban Edge and UDR go up and down completely randomly.

Pair Corralation between Urban Edge and UDR

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to under-perform the UDR. But the stock apears to be less risky and, when comparing its historical volatility, Urban Edge Properties is 1.08 times less risky than UDR. The stock trades about -0.33 of its potential returns per unit of risk. The UDR Inc is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  4,450  in UDR Inc on October 11, 2024 and sell it today you would lose (328.00) from holding UDR Inc or give up 7.37% of portfolio value over 90 days.

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

Urban Edge Properties  vs.  UDR Inc

Urban Edge Properties

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, Urban Edge is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

UDR Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UDR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, UDR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Urban Edge and UDR

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

The idea behind Urban Edge Properties and UDR Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.