Correlation Between Essential Properties and CoStar

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

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

Diversification Opportunities for Essential Properties and CoStar

-0.7

Correlation Coefficient

Essential Properties  CoStar

Excellent diversification

The 3 months correlation between Essential and CoStar is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and CoStar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoStar Group and Essential Properties 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 Essential Properties Realty are associated (or correlated) with CoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoStar Group has no effect on the direction of Essential Properties i.e., Essential Properties and CoStar go up and down completely randomly.

Pair Corralation between Essential Properties and CoStar

Given the investment horizon of 90 days Essential Properties Realty is expected to under-perform the CoStar. But the stock apears to be less risky and, when comparing its historical volatility, Essential Properties Realty is 1.28 times less risky than CoStar. The stock trades about -0.04 of its potential returns per unit of risk. The CoStar Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  7,518  in CoStar Group on May 13, 2025 and sell it today you would earn a total of  1,932  from holding CoStar Group or generate 25.7% return on investment over 90 days.

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

Essential Properties Realty  vs.  CoStar Group

Essential Properties

Risk-Adjusted Performance

Weakest

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

CoStar Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CoStar Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, CoStar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Essential Properties and CoStar

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

The idea behind Essential Properties Realty and CoStar Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.