Correlation Between Essential Properties and ZEGA Buy

Can any of the company-specific risk be diversified away by investing in both Essential Properties and ZEGA Buy 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 ZEGA Buy 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 ZEGA Buy and, you can compare the effects of market volatilities on Essential Properties and ZEGA Buy 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 ZEGA Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Properties and ZEGA Buy.

Diversification Opportunities for Essential Properties and ZEGA Buy

0.62

Correlation Coefficient

Essential Properties  ZEGA Buy

Poor diversification

The 3 months correlation between Essential and ZEGA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and ZEGA Buy and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZEGA Buy 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 ZEGA Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZEGA Buy has no effect on the direction of Essential Properties i.e., Essential Properties and ZEGA Buy go up and down completely randomly.

Pair Corralation between Essential Properties and ZEGA Buy

Given the investment horizon of 90 days Essential Properties Realty is expected to generate 2.86 times more return on investment than ZEGA Buy. However, Essential Properties is 2.86 times more volatile than ZEGA Buy and. It trades about 0.06 of its potential returns per unit of risk. ZEGA Buy and is currently generating about -0.2 per unit of risk. If you would invest  2,587  in Essential Properties Realty on January 26, 2024 and sell it today you would earn a total of  46.00  from holding Essential Properties Realty or generate 1.78% return on investment over 90 days.

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

Essential Properties Realty  vs.  ZEGA Buy and

Essential Properties

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Properties Realty are ranked lower than 7 (%) 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.

ZEGA Buy

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZEGA Buy and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, ZEGA Buy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Essential Properties and ZEGA Buy

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

The idea behind Essential Properties Realty and ZEGA Buy and 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.