Correlation Between Equity Lifestyle and AvalonBay Communities
Can any of the company-specific risk be diversified away by investing in both Equity Lifestyle and AvalonBay Communities 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 Lifestyle and AvalonBay Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Lifestyle Properties and AvalonBay Communities, you can compare the effects of market volatilities on Equity Lifestyle and AvalonBay Communities 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 Lifestyle with a short position of AvalonBay Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Lifestyle and AvalonBay Communities.
Diversification Opportunities for Equity Lifestyle and AvalonBay Communities
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Equity and AvalonBay is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Equity Lifestyle Properties and AvalonBay Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvalonBay Communities and Equity Lifestyle 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 Lifestyle Properties are associated (or correlated) with AvalonBay Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvalonBay Communities has no effect on the direction of Equity Lifestyle i.e., Equity Lifestyle and AvalonBay Communities go up and down completely randomly.
Pair Corralation between Equity Lifestyle and AvalonBay Communities
Considering the 90-day investment horizon Equity Lifestyle Properties is expected to under-perform the AvalonBay Communities. But the stock apears to be less risky and, when comparing its historical volatility, Equity Lifestyle Properties is 1.11 times less risky than AvalonBay Communities. The stock trades about -0.12 of its potential returns per unit of risk. The AvalonBay Communities is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 17,951 in AvalonBay Communities on January 20, 2024 and sell it today you would earn a total of 462.00 from holding AvalonBay Communities or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Lifestyle Properties vs. AvalonBay Communities
Performance |
| Timeline |
| Equity Lifestyle Pro |
| AvalonBay Communities |
Equity Lifestyle and AvalonBay Communities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Lifestyle and AvalonBay Communities
The main advantage of trading using opposite Equity Lifestyle and AvalonBay Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Lifestyle position performs unexpectedly, AvalonBay Communities 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 AvalonBay Communities will offset losses from the drop in AvalonBay Communities' long position.| Equity Lifestyle vs. UMH Properties | Equity Lifestyle vs. UDR Inc | Equity Lifestyle vs. AvalonBay Communities | Equity Lifestyle vs. Nexpoint Residential Trust |
| AvalonBay Communities vs. Essex Property Trust | AvalonBay Communities vs. UDR Inc | AvalonBay Communities vs. Mid America Apartment Communities | AvalonBay Communities vs. Camden Property Trust |
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 the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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