Correlation Between Centerspace and Equity Lifestyle

Can any of the company-specific risk be diversified away by investing in both Centerspace and Equity Lifestyle 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 Centerspace and Equity Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Centerspace and Equity Lifestyle Properties, you can compare the effects of market volatilities on Centerspace and Equity Lifestyle 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 Centerspace with a short position of Equity Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centerspace and Equity Lifestyle.

Diversification Opportunities for Centerspace and Equity Lifestyle

-0.25

Correlation Coefficient

Centerspace  Equity Lifestyle

Very good diversification

The 3 months correlation between Centerspace and Equity is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Centerspace and Equity Lifestyle Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Lifestyle Pro and Centerspace 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 Centerspace are associated (or correlated) with Equity Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Lifestyle Pro has no effect on the direction of Centerspace i.e., Centerspace and Equity Lifestyle go up and down completely randomly.

Pair Corralation between Centerspace and Equity Lifestyle

Considering the 90-day investment horizon Centerspace is expected to generate 9.12 times more return on investment than Equity Lifestyle. However, Centerspace is 9.12 times more volatile than Equity Lifestyle Properties. It trades about 0.04 of its potential returns per unit of risk. Equity Lifestyle Properties is currently generating about -0.01 per unit of risk. If you would invest  5,218  in Centerspace on January 20, 2024 and sell it today you would earn a total of  1,039  from holding Centerspace or generate 19.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Centerspace  vs.  Equity Lifestyle Properties

Centerspace

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centerspace are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Centerspace reported solid returns over the last few months and may actually be approaching a breakup point.

Equity Lifestyle Pro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Lifestyle Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Centerspace and Equity Lifestyle

The main advantage of trading using opposite Centerspace and Equity Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centerspace position performs unexpectedly, Equity Lifestyle 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 Lifestyle will offset losses from the drop in Equity Lifestyle's long position.

The idea behind Centerspace and Equity Lifestyle Properties 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.