Correlation Between Equity Residential and American Campus
Can any of the company-specific risk be diversified away by investing in both Equity Residential and American Campus 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 American Campus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Residential and American Campus Communities, you can compare the effects of market volatilities on Equity Residential and American Campus 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 American Campus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Residential and American Campus.
Diversification Opportunities for Equity Residential and American Campus
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Equity and American is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and American Campus Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Campus Comm 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 American Campus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Campus Comm has no effect on the direction of Equity Residential i.e., Equity Residential and American Campus go up and down completely randomly.
Pair Corralation between Equity Residential and American Campus
Considering the 90-day investment horizon Equity Residential is expected to under-perform the American Campus. In addition to that, Equity Residential is 6.77 times more volatile than American Campus Communities. It trades about -0.03 of its total potential returns per unit of risk. American Campus Communities is currently generating about 0.07 per unit of volatility. If you would invest 6,470 in American Campus Communities on January 17, 2024 and sell it today you would earn a total of 72.00 from holding American Campus Communities or generate 1.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 14.75% |
| Values | Daily Returns |
Equity Residential vs. American Campus Communities
Performance |
| Timeline |
| Equity Residential |
| American Campus Comm |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Equity Residential and American Campus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Residential and American Campus
The main advantage of trading using opposite Equity Residential and American Campus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential position performs unexpectedly, American Campus 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 American Campus will offset losses from the drop in American Campus' long position.| Equity Residential vs. Essex Property Trust | Equity Residential vs. Mid America Apartment Communities | Equity Residential vs. Camden Property Trust | Equity Residential vs. UDR Inc |
| American Campus vs. Oasis Hotel Resort | American Campus vs. Melco Resorts Entertainment | American Campus vs. Pebblebrook Hotel Trust | American Campus vs. CECO Environmental Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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