Correlation Between Essential Properties and Molson Coors

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

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

Diversification Opportunities for Essential Properties and Molson Coors

0.78

Correlation Coefficient

Essential Properties  Molson Coors

Poor diversification

The 3 months correlation between Essential and Molson is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage and Essential Properties 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 Essential Properties Realty are associated (or correlated) with Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Essential Properties i.e., Essential Properties and Molson Coors go up and down completely randomly.

Pair Corralation between Essential Properties and Molson Coors

Given the investment horizon of 90 days Essential Properties Realty is expected to generate 18.19 times more return on investment than Molson Coors. However, Essential Properties is 18.19 times more volatile than Molson Coors Beverage. It trades about 0.1 of its potential returns per unit of risk. Molson Coors Beverage is currently generating about -0.22 per unit of risk. If you would invest  2,546  in Essential Properties Realty on January 25, 2024 and sell it today you would earn a total of  87.00  from holding Essential Properties Realty or generate 3.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Essential Properties Realty  vs.  Molson Coors Beverage

Essential Properties

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Essential Properties may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Molson Coors Beverage

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Essential Properties and Molson Coors

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

The idea behind Essential Properties Realty and Molson Coors Beverage 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.