Correlation Between Boston Properties and Broadstone Net

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

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

Diversification Opportunities for Boston Properties and Broadstone Net

0.21

Correlation Coefficient

Boston Properties  Broadstone Net

Modest diversification

The 3 months correlation between Boston and Broadstone is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Broadstone Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadstone Net Lease and Boston 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 Boston Properties are associated (or correlated) with Broadstone Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadstone Net Lease has no effect on the direction of Boston Properties i.e., Boston Properties and Broadstone Net go up and down completely randomly.

Pair Corralation between Boston Properties and Broadstone Net

Considering the 90-day investment horizon Boston Properties is expected to generate 1.65 times more return on investment than Broadstone Net. However, Boston Properties is 1.65 times more volatile than Broadstone Net Lease. It trades about 0.03 of its potential returns per unit of risk. Broadstone Net Lease is currently generating about 0.02 per unit of risk. If you would invest  6,131  in Boston Properties on September 4, 2024 and sell it today you would earn a total of  1,884  from holding Boston Properties or generate 30.73% return on investment over 90 days.

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

Boston Properties  vs.  Broadstone Net Lease

Boston Properties

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Properties are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Boston Properties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Broadstone Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadstone Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Broadstone Net is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Boston Properties and Broadstone Net

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

The idea behind Boston Properties and Broadstone Net Lease 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.