Correlation Between Alexandria Real and Highwoods Properties

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

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

Diversification Opportunities for Alexandria Real and Highwoods Properties

0.9

Correlation Coefficient

Alexandria Real  Highwoods Properties

Almost no diversification

The 3 months correlation between Alexandria and Highwoods is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate and Highwoods Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwoods Properties and Alexandria Real 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 Alexandria Real Estate are associated (or correlated) with Highwoods Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwoods Properties has no effect on the direction of Alexandria Real i.e., Alexandria Real and Highwoods Properties go up and down completely randomly.

Pair Corralation between Alexandria Real and Highwoods Properties

Considering the 90-day investment horizon Alexandria Real Estate is expected to under-perform the Highwoods Properties. But the stock apears to be less risky and, when comparing its historical volatility, Alexandria Real Estate is 1.1 times less risky than Highwoods Properties. The stock trades about -0.02 of its potential returns per unit of risk. The Highwoods Properties is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,323  in Highwoods Properties on November 20, 2024 and sell it today you would earn a total of  595.00  from holding Highwoods Properties or generate 25.61% return on investment over 90 days.

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

Alexandria Real Estate  vs.  Highwoods Properties

Alexandria Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alexandria Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Highwoods Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highwoods Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Alexandria Real and Highwoods Properties

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

The idea behind Alexandria Real Estate and Highwoods 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .