Correlation Between AvalonBay Communities and Mid America

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Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities 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 AvalonBay Communities and Mid America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AvalonBay Communities and Mid America Apartment Communities, you can compare the effects of market volatilities on AvalonBay Communities 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 AvalonBay Communities with a short position of Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and Mid America.

Diversification Opportunities for AvalonBay Communities and Mid America

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between AvalonBay and Mid is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities i.e., AvalonBay Communities and Mid America go up and down completely randomly.

Pair Corralation between AvalonBay Communities and Mid America

Assuming the 90 days horizon AvalonBay Communities is expected to generate 1.12 times more return on investment than Mid America. However, AvalonBay Communities is 1.12 times more volatile than Mid America Apartment Communities. It trades about -0.16 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about -0.22 per unit of risk. If you would invest  18,394  in AvalonBay Communities on May 5, 2025 and sell it today you would lose (2,440) from holding AvalonBay Communities or give up 13.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

AvalonBay Communities  vs.  Mid America Apartment Communit

 Performance 
       Timeline  
AvalonBay Communities 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days AvalonBay Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Mid America Apartment 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Mid America Apartment Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AvalonBay Communities and Mid America Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AvalonBay Communities and Mid America

The main advantage of trading using opposite AvalonBay Communities and Mid America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities 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 AvalonBay Communities 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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