Correlation Between Essential Properties and Vanguard Index

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

Diversification Opportunities for Essential Properties and Vanguard Index

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Essential and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and Vanguard Index Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Trust 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 Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Trust has no effect on the direction of Essential Properties i.e., Essential Properties and Vanguard Index go up and down completely randomly.

Pair Corralation between Essential Properties and Vanguard Index

Given the investment horizon of 90 days Essential Properties Realty is expected to under-perform the Vanguard Index. In addition to that, Essential Properties is 1.53 times more volatile than Vanguard Index Trust. It trades about -0.28 of its total potential returns per unit of risk. Vanguard Index Trust is currently generating about -0.28 per unit of volatility. If you would invest  36,176  in Vanguard Index Trust on July 5, 2022 and sell it today you would lose (3,087)  from holding Vanguard Index Trust or give up 8.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Essential Properties Realty  vs.  Vanguard Index Trust

 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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Essential Price Channel

Vanguard Index Trust 
Vanguard Performance
0 of 100
Over the last 90 days Vanguard Index Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Index is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Price Channel

Essential Properties and Vanguard Index Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Essential Properties and Vanguard Index

The main advantage of trading using opposite Essential Properties and Vanguard Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Properties position performs unexpectedly, Vanguard Index 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 Vanguard Index will offset losses from the drop in Vanguard Index's long position.
Essential Properties vs. WP Carey Co
The idea behind Essential Properties Realty and Vanguard Index Trust 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.
Vanguard Index vs. Walt Disney
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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