Correlation Between CITY OFFICE and Cheniere Energy

Can any of the company-specific risk be diversified away by investing in both CITY OFFICE and Cheniere Energy 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 Cheniere Energy 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 Cheniere Energy, you can compare the effects of market volatilities on CITY OFFICE and Cheniere Energy 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 Cheniere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and Cheniere Energy.

Diversification Opportunities for CITY OFFICE and Cheniere Energy

0.3

Correlation Coefficient

CITY OFFICE  Cheniere Energy

Weak diversification

The 3 months correlation between CITY and Cheniere is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Cheniere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and Cheniere Energy go up and down completely randomly.

Pair Corralation between CITY OFFICE and Cheniere Energy

Assuming the 90 days horizon CITY OFFICE REIT is expected to generate 1.83 times more return on investment than Cheniere Energy. However, CITY OFFICE is 1.83 times more volatile than Cheniere Energy. It trades about 0.07 of its potential returns per unit of risk. Cheniere Energy is currently generating about 0.12 per unit of risk. If you would invest  412.00  in CITY OFFICE REIT on October 4, 2024 and sell it today you would earn a total of  98.00  from holding CITY OFFICE REIT or generate 23.79% return on investment over 90 days.

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

CITY OFFICE REIT  vs.  Cheniere Energy

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 February 2025.

Cheniere Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITY OFFICE and Cheniere Energy

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

The idea behind CITY OFFICE REIT and Cheniere Energy 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.