Correlation Between Equity Lifestyle and Centerspace

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

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

Diversification Opportunities for Equity Lifestyle and Centerspace

0.74

Correlation Coefficient

Equity Lifestyle  Centerspace

Poor diversification

The 3 months correlation between Equity and Centerspace is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Equity Lifestyle Properties and Centerspace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerspace and Equity Lifestyle 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 Lifestyle Properties are associated (or correlated) with Centerspace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerspace has no effect on the direction of Equity Lifestyle i.e., Equity Lifestyle and Centerspace go up and down completely randomly.

Pair Corralation between Equity Lifestyle and Centerspace

Considering the 90-day investment horizon Equity Lifestyle Properties is expected to under-perform the Centerspace. But the stock apears to be less risky and, when comparing its historical volatility, Equity Lifestyle Properties is 1.49 times less risky than Centerspace. The stock trades about -0.02 of its potential returns per unit of risk. The Centerspace is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  5,775  in Centerspace on February 16, 2025 and sell it today you would earn a total of  555.00  from holding Centerspace or generate 9.61% return on investment over 90 days.

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

Equity Lifestyle Properties  vs.  Centerspace

Equity Lifestyle Pro

Risk-Adjusted Performance

Very Weak

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

Centerspace

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centerspace are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Centerspace is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Equity Lifestyle and Centerspace

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

The idea behind Equity Lifestyle Properties and Centerspace 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.