Correlation Between Equinix and Sun Communities

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

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

Diversification Opportunities for Equinix and Sun Communities

0.92

Correlation Coefficient

Equinix  Sun Communities

Almost no diversification

The 3 months correlation between Equinix and Sun is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities and Equinix 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 Equinix are associated (or correlated) with Sun Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Communities has no effect on the direction of Equinix i.e., Equinix and Sun Communities go up and down completely randomly.

Pair Corralation between Equinix and Sun Communities

Given the investment horizon of 90 days Equinix is expected to generate 1.06 times more return on investment than Sun Communities. However, Equinix is 1.06 times more volatile than Sun Communities. It trades about 0.02 of its potential returns per unit of risk. Sun Communities is currently generating about -0.01 per unit of risk. If you would invest  71,390  in Equinix on February 11, 2024 and sell it today you would earn a total of  4,378  from holding Equinix or generate 6.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

Equinix  vs.  Sun Communities

Equinix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sun Communities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Equinix and Sun Communities

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

The idea behind Equinix and Sun 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.