Correlation Between Urban Edge and Sun Communities

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

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

Diversification Opportunities for Urban Edge and Sun Communities

0.16

Correlation Coefficient

Urban Edge  Sun Communities

Average diversification

The 3 months correlation between Urban and Sun is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities and Urban Edge 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 Urban Edge Properties 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 Urban Edge i.e., Urban Edge and Sun Communities go up and down completely randomly.

Pair Corralation between Urban Edge and Sun Communities

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to generate 1.05 times more return on investment than Sun Communities. However, Urban Edge is 1.05 times more volatile than Sun Communities. It trades about 0.01 of its potential returns per unit of risk. Sun Communities is currently generating about -0.02 per unit of risk. If you would invest  1,681  in Urban Edge Properties on February 13, 2024 and sell it today you would earn a total of  40.00  from holding Urban Edge Properties or generate 2.38% return on investment over 90 days.

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

Urban Edge Properties  vs.  Sun Communities

Urban Edge Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Urban Edge Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Urban Edge is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Urban Edge and Sun Communities

The main advantage of trading using opposite Urban Edge and Sun Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Edge 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 Urban Edge Properties 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.

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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.