Correlation Between Mid-America Apartment and Equity Residential

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

Diversification Opportunities for Mid-America Apartment and Equity Residential

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Mid-America and Equity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Mid-America Apartment Communit and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and Mid-America Apartment 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 Mid-America Apartment Communities are associated (or correlated) with Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Mid-America Apartment i.e., Mid-America Apartment and Equity Residential go up and down completely randomly.

Pair Corralation between Mid-America Apartment and Equity Residential

Considering the 90-day investment horizon Mid-America Apartment Communities is expected to generate 0.93 times more return on investment than Equity Residential. However, Mid-America Apartment Communities is 1.08 times less risky than Equity Residential. It trades about -0.16 of its potential returns per unit of risk. Equity Residential is currently generating about -0.25 per unit of risk. If you would invest  16,422  in Mid-America Apartment Communities on July 4, 2022 and sell it today you would lose (915.00)  from holding Mid-America Apartment Communities or give up 5.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Mid-America Apartment Communit  vs.  Equity Residential

 Performance (%) 
       Timeline  
Mid-America Apartment 
Mid-America Performance
0 of 100
Over the last 90 days Mid-America Apartment Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mid-America Price Channel

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 latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Equity Price Channel

Mid-America Apartment and Equity Residential Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mid-America Apartment and Equity Residential

The main advantage of trading using opposite Mid-America Apartment and Equity Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-America Apartment position performs unexpectedly, Equity Residential 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 Equity Residential will offset losses from the drop in Equity Residential's long position.
Mid-America Apartment vs. Amazon Inc
The idea behind Mid-America Apartment Communities and Equity Residential 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.
Equity Residential vs. Amazon Inc
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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