Correlation Between Four Corners and Elme Communities

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

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

Diversification Opportunities for Four Corners and Elme Communities

0.65

Correlation Coefficient

Four Corners  Elme Communities

Poor diversification

The 3 months correlation between Four and Elme is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Four Corners Property and Elme Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elme Communities and Four Corners 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 Four Corners Property are associated (or correlated) with Elme Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elme Communities has no effect on the direction of Four Corners i.e., Four Corners and Elme Communities go up and down completely randomly.

Pair Corralation between Four Corners and Elme Communities

Given the investment horizon of 90 days Four Corners Property is expected to generate 0.8 times more return on investment than Elme Communities. However, Four Corners Property is 1.26 times less risky than Elme Communities. It trades about 0.03 of its potential returns per unit of risk. Elme Communities is currently generating about 0.01 per unit of risk. If you would invest  2,438  in Four Corners Property on August 10, 2024 and sell it today you would earn a total of  343.00  from holding Four Corners Property or generate 14.07% return on investment over 90 days.

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

Four Corners Property  vs.  Elme Communities

Four Corners Property

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Four Corners Property are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Four Corners is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Elme Communities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elme Communities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Elme Communities is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Four Corners and Elme Communities

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

The idea behind Four Corners Property and Elme 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.