Correlation Between CITY OFFICE and Boston Properties

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

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

Diversification Opportunities for CITY OFFICE and Boston Properties

0.17

Correlation Coefficient

CITY OFFICE  Boston Properties

Average diversification

The 3 months correlation between CITY and Boston is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and CITY OFFICE 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 CITY OFFICE REIT are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and Boston Properties go up and down completely randomly.

Pair Corralation between CITY OFFICE and Boston Properties

Assuming the 90 days horizon CITY OFFICE REIT is expected to generate 1.79 times more return on investment than Boston Properties. However, CITY OFFICE is 1.79 times more volatile than Boston Properties. It trades about 0.12 of its potential returns per unit of risk. Boston Properties is currently generating about -0.2 per unit of risk. If you would invest  484.00  in CITY OFFICE REIT on September 27, 2024 and sell it today you would earn a total of  36.00  from holding CITY OFFICE REIT or generate 7.44% return on investment over 90 days.

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

CITY OFFICE REIT  vs.  Boston Properties

CITY OFFICE REIT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CITY OFFICE REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITY OFFICE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boston Properties

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with CITY OFFICE and Boston Properties

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

The idea behind CITY OFFICE REIT and Boston Properties 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.