Correlation Between Equity Residential and BRT Realty

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

Diversification Opportunities for Equity Residential and BRT Realty

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Equity and BRT Realty is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and BRT Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRT Realty Trust 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 BRT Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRT Realty Trust has no effect on the direction of Equity Residential i.e., Equity Residential and BRT Realty go up and down completely randomly.

Pair Corralation between Equity Residential and BRT Realty

Considering the 90-day investment horizon Equity Residential is expected to generate 2.51 times less return on investment than BRT Realty. But when comparing it to its historical volatility, Equity Residential is 1.47 times less risky than BRT Realty. It trades about 0.04 of its potential returns per unit of risk. BRT Realty Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,009  in BRT Realty Trust on April 7, 2022 and sell it today you would earn a total of  1,201  from holding BRT Realty Trust or generate 119.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Equity Residential  vs.  BRT Realty Trust

 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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in August 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
0.0337
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

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

Structure and Payout Changes

Forward Annual Dividend Yield
0.0455
Payout Ratio
1.13
Last Split Factor
1:3
Forward Annual Dividend Rate
1.0
Dividend Date
2022-07-08
Ex Dividend Date
2022-06-29
Last Split Date
1986-08-25

BRT Realty Price Channel

Equity Residential and BRT Realty Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Equity Residential and BRT Realty

The main advantage of trading using opposite Equity Residential and BRT Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential position performs unexpectedly, BRT Realty 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 BRT Realty will offset losses from the drop in BRT Realty's long position.
The idea behind Equity Residential and BRT Realty 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.
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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