Correlation Between Elme Communities and Apartment Investment

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

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

Diversification Opportunities for Elme Communities and Apartment Investment

0.82

Correlation Coefficient

Elme Communities  Apartment Investment

Very poor diversification

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

Pair Corralation between Elme Communities and Apartment Investment

Given the investment horizon of 90 days Elme Communities is expected to generate 0.71 times more return on investment than Apartment Investment. However, Elme Communities is 1.42 times less risky than Apartment Investment. It trades about 0.25 of its potential returns per unit of risk. Apartment Investment and is currently generating about 0.17 per unit of risk. If you would invest  1,531  in Elme Communities on June 25, 2024 and sell it today you would earn a total of  248.00  from holding Elme Communities or generate 16.2% return on investment over 90 days.

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

Elme Communities  vs.  Apartment Investment and

Elme Communities

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elme Communities are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal primary indicators, Elme Communities exhibited solid returns over the last few months and may actually be approaching a breakup point.

Apartment Investment and

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Apartment Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elme Communities and Apartment Investment

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

The idea behind Elme Communities and Apartment Investment 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.