Correlation Between Equity Residential and Camden Property

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

By analyzing existing cross correlation between Equity Residential and Camden Property Trust, you can compare the effects of market volatilities on Equity Residential and Camden Property 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 Camden Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Residential and Camden Property.

Diversification Opportunities for Equity Residential and Camden Property

0.82

Correlation Coefficient

Equity Residential  Camden Property

Very poor diversification

The 3 months correlation between Equity and Camden is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and Camden Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camden Property Trust 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 Camden Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camden Property Trust has no effect on the direction of Equity Residential i.e., Equity Residential and Camden Property go up and down completely randomly.

Pair Corralation between Equity Residential and Camden Property

Considering the 90-day investment horizon Equity Residential is expected to generate 0.85 times more return on investment than Camden Property. However, Equity Residential is 1.18 times less risky than Camden Property. It trades about 0.05 of its potential returns per unit of risk. Camden Property Trust is currently generating about 0.04 per unit of risk. If you would invest  5,574  in Equity Residential on January 19, 2024 and sell it today you would earn a total of  467.00  from holding Equity Residential or generate 8.38% return on investment over 90 days.

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

Equity Residential  vs.  Camden Property Trust

Equity Residential

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Residential has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equity Residential is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Camden Property Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Camden Property Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Camden Property is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Equity Residential and Camden Property

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

The idea behind Equity Residential and Camden Property Trust 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.