Correlation Between Essential Properties and AERGO

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Can any of the company-specific risk be diversified away by investing in both Essential Properties and AERGO 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 Essential Properties and AERGO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essential Properties Realty and AERGO, you can compare the effects of market volatilities on Essential Properties and AERGO 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 Essential Properties with a short position of AERGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Properties and AERGO.

Diversification Opportunities for Essential Properties and AERGO

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Essential and AERGO is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and AERGO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AERGO and Essential Properties 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 Essential Properties Realty are associated (or correlated) with AERGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AERGO has no effect on the direction of Essential Properties i.e., Essential Properties and AERGO go up and down completely randomly.

Pair Corralation between Essential Properties and AERGO

Given the investment horizon of 90 days Essential Properties Realty is expected to under-perform the AERGO. But the stock apears to be less risky and, when comparing its historical volatility, Essential Properties Realty is 7.07 times less risky than AERGO. The stock trades about -0.38 of its potential returns per unit of risk. The AERGO is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  12.00  in AERGO on June 29, 2022 and sell it today you would earn a total of  2.00  from holding AERGO or generate 16.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy76.19%
ValuesDaily Returns

Essential Properties Realty  vs.  AERGO

 Performance (%) 
       Timeline  
Essential Properties 
Essential Performance
0 of 100
Over the last 90 days Essential Properties Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Essential Properties is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Essential Price Channel

AERGO 
AERGO Performance
0 of 100
Over the last 90 days AERGO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak technical and fundamental indicators, AERGO sustained solid returns over the last few months and may actually be approaching a breakup point.

Essential Properties and AERGO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Essential Properties and AERGO

The main advantage of trading using opposite Essential Properties and AERGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Properties position performs unexpectedly, AERGO 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 AERGO will offset losses from the drop in AERGO's long position.
Essential Properties vs. Kibush Capital Corp
The idea behind Essential Properties Realty and AERGO 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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