Correlation Between Equity Residential and Sun Communities

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

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

Diversification Opportunities for Equity Residential and Sun Communities

-0.05

Correlation Coefficient

Equity Residential  Sun Communities

Good diversification

The 3 months correlation between Equity and Sun is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities and Equity Residential 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 Equity Residential 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 Equity Residential i.e., Equity Residential and Sun Communities go up and down completely randomly.

Pair Corralation between Equity Residential and Sun Communities

Assuming the 90 days horizon Equity Residential is expected to under-perform the Sun Communities. But the stock apears to be less risky and, when comparing its historical volatility, Equity Residential is 1.11 times less risky than Sun Communities. The stock trades about -0.04 of its potential returns per unit of risk. The Sun Communities is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,288  in Sun Communities on April 24, 2025 and sell it today you would earn a total of  212.00  from holding Sun Communities or generate 2.06% return on investment over 90 days.

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

Equity Residential  vs.  Sun Communities

Equity Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Residential has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Equity Residential is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sun Communities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Communities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sun Communities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Equity Residential and Sun Communities

The main advantage of trading using opposite Equity Residential and Sun Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential 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 Equity Residential 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.