Correlation Between Allied Properties and Boston Properties

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

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

Diversification Opportunities for Allied Properties and Boston Properties

0.45

Correlation Coefficient

Allied Properties  Boston Properties

Very weak diversification

The 3 months correlation between Allied and Boston is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Allied Properties Real and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Allied Properties 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 Allied Properties Real 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 Allied Properties i.e., Allied Properties and Boston Properties go up and down completely randomly.

Pair Corralation between Allied Properties and Boston Properties

Assuming the 90 days horizon Allied Properties Real is expected to under-perform the Boston Properties. But the pink sheet apears to be less risky and, when comparing its historical volatility, Allied Properties Real is 1.17 times less risky than Boston Properties. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Boston Properties is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  8,624  in Boston Properties on October 26, 2024 and sell it today you would lose (1,351) from holding Boston Properties or give up 15.67% of portfolio value over 90 days.

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

Allied Properties Real  vs.  Boston Properties

Allied Properties Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Allied Properties and Boston Properties

The main advantage of trading using opposite Allied Properties and Boston Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Properties 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 Allied Properties Real 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.