Correlation Between Elme Communities and Public Storage

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

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

Diversification Opportunities for Elme Communities and Public Storage

0.61

Correlation Coefficient

Elme Communities  Public Storage

Poor diversification

The 3 months correlation between Elme and Public is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Elme Communities and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of Elme Communities i.e., Elme Communities and Public Storage go up and down completely randomly.

Pair Corralation between Elme Communities and Public Storage

Given the investment horizon of 90 days Elme Communities is expected to under-perform the Public Storage. But the stock apears to be less risky and, when comparing its historical volatility, Elme Communities is 1.12 times less risky than Public Storage. The stock trades about -0.03 of its potential returns per unit of risk. The Public Storage is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  33,883  in Public Storage on August 31, 2024 and sell it today you would earn a total of  1,253  from holding Public Storage or generate 3.7% return on investment over 90 days.

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

Elme Communities  vs.  Public Storage

Elme Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elme Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Elme Communities is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Public Storage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Public Storage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Public Storage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elme Communities and Public Storage

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

The idea behind Elme Communities and Public Storage 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.