Correlation Between Equity Lifestyle and Mid America

Can any of the company-specific risk be diversified away by investing in both Equity Lifestyle and Mid America 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 Mid America 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 Mid America Apartment Communities, you can compare the effects of market volatilities on Equity Lifestyle and Mid America 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 Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Lifestyle and Mid America.

Diversification Opportunities for Equity Lifestyle and Mid America

0.45

Correlation Coefficient

Equity Lifestyle  Mid America

Very weak diversification

The 3 months correlation between Equity and Mid is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Equity Lifestyle Properties and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment 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 Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of Equity Lifestyle i.e., Equity Lifestyle and Mid America go up and down completely randomly.

Pair Corralation between Equity Lifestyle and Mid America

Considering the 90-day investment horizon Equity Lifestyle Properties is expected to under-perform the Mid America. But the stock apears to be less risky and, when comparing its historical volatility, Equity Lifestyle Properties is 1.19 times less risky than Mid America. The stock trades about -0.09 of its potential returns per unit of risk. The Mid America Apartment Communities is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  16,929  in Mid America Apartment Communities on March 2, 2025 and sell it today you would lose (1,264) from holding Mid America Apartment Communities or give up 7.47% of portfolio value over 90 days.

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

Equity Lifestyle Properties  vs.  Mid America Apartment Communit

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 latest inconsistent performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Mid America Apartment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid America Apartment Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Equity Lifestyle and Mid America

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

The idea behind Equity Lifestyle Properties and Mid America Apartment Communities 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.