Correlation Between Essex Property and UMH Properties

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

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

Diversification Opportunities for Essex Property and UMH Properties

0.71

Correlation Coefficient

Essex Property  UMH Properties

Poor diversification

The 3 months correlation between Essex and UMH is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Essex Property Trust and UMH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMH Properties and Essex Property 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 Essex Property Trust are associated (or correlated) with UMH Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMH Properties has no effect on the direction of Essex Property i.e., Essex Property and UMH Properties go up and down completely randomly.

Pair Corralation between Essex Property and UMH Properties

Considering the 90-day investment horizon Essex Property Trust is expected to under-perform the UMH Properties. In addition to that, Essex Property is 1.38 times more volatile than UMH Properties. It trades about -0.07 of its total potential returns per unit of risk. UMH Properties is currently generating about -0.02 per unit of volatility. If you would invest  1,698  in UMH Properties on May 8, 2025 and sell it today you would lose (34.00) from holding UMH Properties or give up 2.0% of portfolio value over 90 days.

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

Essex Property Trust  vs.  UMH Properties

Essex Property Trust

Risk-Adjusted Performance

Weakest

Over the last 90 days Essex Property Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

UMH Properties

Risk-Adjusted Performance

Weakest

Over the last 90 days UMH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, UMH Properties is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Essex Property and UMH Properties

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

The idea behind Essex Property Trust and UMH Properties 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.