Correlation Between AvalonBay Communities and Couchbase

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

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

Diversification Opportunities for AvalonBay Communities and Couchbase

-0.4

Correlation Coefficient

AvalonBay Communities  Couchbase

Very good diversification

The 3 months correlation between AvalonBay and Couchbase is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and Couchbase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Couchbase and AvalonBay Communities 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 AvalonBay Communities are associated (or correlated) with Couchbase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Couchbase has no effect on the direction of AvalonBay Communities i.e., AvalonBay Communities and Couchbase go up and down completely randomly.

Pair Corralation between AvalonBay Communities and Couchbase

Considering the 90-day investment horizon AvalonBay Communities is expected to under-perform the Couchbase. But the stock apears to be less risky and, when comparing its historical volatility, AvalonBay Communities is 3.11 times less risky than Couchbase. The stock trades about -0.13 of its potential returns per unit of risk. The Couchbase is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,759  in Couchbase on May 2, 2025 and sell it today you would earn a total of  668.00  from holding Couchbase or generate 37.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

AvalonBay Communities  vs.  Couchbase

AvalonBay Communities

Risk-Adjusted Performance

Very Weak

Over the last 90 days AvalonBay Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Couchbase

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Couchbase are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Couchbase exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AvalonBay Communities and Couchbase

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

The idea behind AvalonBay Communities and Couchbase 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.