Correlation Between Douglas Elliman and Essex Property

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

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

Diversification Opportunities for Douglas Elliman and Essex Property

-0.61

Correlation Coefficient

Douglas Elliman  Essex Property

Excellent diversification

The 3 months correlation between Douglas and Essex is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Elliman and Essex Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Property Trust and Douglas Elliman 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 Douglas Elliman are associated (or correlated) with Essex Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Property Trust has no effect on the direction of Douglas Elliman i.e., Douglas Elliman and Essex Property go up and down completely randomly.

Pair Corralation between Douglas Elliman and Essex Property

Given the investment horizon of 90 days Douglas Elliman is expected to generate 1.09 times less return on investment than Essex Property. In addition to that, Douglas Elliman is 6.1 times more volatile than Essex Property Trust. It trades about 0.08 of its total potential returns per unit of risk. Essex Property Trust is currently generating about 0.56 per unit of volatility. If you would invest  23,265  in Essex Property Trust on February 17, 2024 and sell it today you would earn a total of  3,206  from holding Essex Property Trust or generate 13.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Douglas Elliman  vs.  Essex Property Trust

Douglas Elliman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Elliman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Essex Property Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Essex Property Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Essex Property unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Douglas Elliman and Essex Property

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

The idea behind Douglas Elliman and Essex Property Trust 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 Stocks Directory module to find actively traded stocks across global markets.