Correlation Between Brandywine Realty and Equity Commonwealth

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

By analyzing existing cross correlation between Brandywine Realty Trust and Equity Commonwealth, you can compare the effects of market volatilities on Brandywine Realty and Equity Commonwealth 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 Brandywine Realty with a short position of Equity Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brandywine Realty and Equity Commonwealth.

Diversification Opportunities for Brandywine Realty and Equity Commonwealth

0.79

Correlation Coefficient

Brandywine Realty  Equity Commonwealth

Poor diversification

The 3 months correlation between Brandywine and Equity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Brandywine Realty Trust and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth and Brandywine Realty 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 Brandywine Realty Trust are associated (or correlated) with Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of Brandywine Realty i.e., Brandywine Realty and Equity Commonwealth go up and down completely randomly.

Pair Corralation between Brandywine Realty and Equity Commonwealth

Considering the 90-day investment horizon Brandywine Realty Trust is expected to under-perform the Equity Commonwealth. In addition to that, Brandywine Realty is 1.09 times more volatile than Equity Commonwealth. It trades about -0.13 of its total potential returns per unit of risk. Equity Commonwealth is currently generating about -0.08 per unit of volatility. If you would invest  177.00  in Equity Commonwealth on December 29, 2024 and sell it today you would lose (16.00) from holding Equity Commonwealth or give up 9.04% of portfolio value over 90 days.

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

Brandywine Realty Trust  vs.  Equity Commonwealth

Brandywine Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brandywine Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Equity Commonwealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Commonwealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Pair Trading with Brandywine Realty and Equity Commonwealth

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

The idea behind Brandywine Realty Trust and Equity Commonwealth 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.