Correlation Between American Assets and COPT Defense

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

By analyzing existing cross correlation between American Assets Trust and COPT Defense Properties, you can compare the effects of market volatilities on American Assets and COPT Defense 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 American Assets with a short position of COPT Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Assets and COPT Defense.

Diversification Opportunities for American Assets and COPT Defense

0.94

Correlation Coefficient

American Assets  COPT Defense

Almost no diversification

The 3 months correlation between American and COPT is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Assets Trust and COPT Defense Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COPT Defense Properties and American Assets 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 American Assets Trust are associated (or correlated) with COPT Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COPT Defense Properties has no effect on the direction of American Assets i.e., American Assets and COPT Defense go up and down completely randomly.

Pair Corralation between American Assets and COPT Defense

Considering the 90-day investment horizon American Assets Trust is expected to under-perform the COPT Defense. In addition to that, American Assets is 1.39 times more volatile than COPT Defense Properties. It trades about -0.21 of its total potential returns per unit of risk. COPT Defense Properties is currently generating about -0.15 per unit of volatility. If you would invest  3,055  in COPT Defense Properties on December 28, 2024 and sell it today you would lose (347.00) from holding COPT Defense Properties or give up 11.36% of portfolio value over 90 days.

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

American Assets Trust  vs.  COPT Defense Properties

American Assets Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Assets Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

COPT Defense Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days COPT Defense Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with American Assets and COPT Defense

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

The idea behind American Assets Trust and COPT Defense 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.