Correlation Between Equity Residential and Preferred Apartment

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

Diversification Opportunities for Equity Residential and Preferred Apartment

-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between Equity and Preferred is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and Preferred Apartment Communitie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Apartment and Equity Residential 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 Equity Residential are associated (or correlated) with Preferred Apartment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Apartment has no effect on the direction of Equity Residential i.e., Equity Residential and Preferred Apartment go up and down completely randomly.

Pair Corralation between Equity Residential and Preferred Apartment

Considering the 90-day investment horizon Equity Residential is expected to generate 4.01 times less return on investment than Preferred Apartment. But when comparing it to its historical volatility, Equity Residential is 1.53 times less risky than Preferred Apartment. It trades about 0.04 of its potential returns per unit of risk. Preferred Apartment Communities is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  635.00  in Preferred Apartment Communities on March 30, 2022 and sell it today you would earn a total of  1,865  from holding Preferred Apartment Communities or generate 293.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Equity Residential  vs.  Preferred Apartment Communitie

 Performance (%) 
      Timeline 
Equity Residential 
Equity Performance
0 of 100
Over the last 90 days Equity Residential has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0342
Payout Ratio
0.8
Last Split Factor
2:1
Forward Annual Dividend Rate
2.46
Dividend Date
2022-07-08
Ex Dividend Date
2022-06-24
Last Split Date
2001-10-12

Equity Price Channel

Preferred Apartment 
Preferred Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Apartment Communities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Preferred Apartment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.028
Forward Annual Dividend Rate
0.7
Dividend Date
2022-04-14
Ex Dividend Date
2022-03-14

Preferred Price Channel

Equity Residential and Preferred Apartment Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Equity Residential and Preferred Apartment

The main advantage of trading using opposite Equity Residential and Preferred Apartment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential position performs unexpectedly, Preferred Apartment 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 Preferred Apartment will offset losses from the drop in Preferred Apartment's long position.
The idea behind Equity Residential and Preferred Apartment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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