Correlation Between Boston Properties and City Office

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

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

Diversification Opportunities for Boston Properties and City Office

0.02

Correlation Coefficient

Boston Properties  City Office

Significant diversification

The 3 months correlation between Boston and City is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and City Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office 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 City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office has no effect on the direction of Boston Properties i.e., Boston Properties and City Office go up and down completely randomly.

Pair Corralation between Boston Properties and City Office

Considering the 90-day investment horizon Boston Properties is expected to generate 16.71 times less return on investment than City Office. But when comparing it to its historical volatility, Boston Properties is 1.66 times less risky than City Office. It trades about 0.03 of its potential returns per unit of risk. City Office is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  501.00  in City Office on September 14, 2024 and sell it today you would earn a total of  81.00  from holding City Office or generate 16.17% return on investment over 90 days.

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

Boston Properties  vs.  City Office

Boston Properties

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Boston Properties is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

City Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, City Office is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Boston Properties and City Office

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

The idea behind Boston Properties and City Office 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.