Correlation Between Boston Properties and Piedmont Office

Can any of the company-specific risk be diversified away by investing in both Boston Properties and Piedmont 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 Piedmont 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 Piedmont Office Realty, you can compare the effects of market volatilities on Boston Properties and Piedmont 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 Piedmont Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Properties and Piedmont Office.

Diversification Opportunities for Boston Properties and Piedmont Office

0.8

Correlation Coefficient

Boston Properties  Piedmont Office

Very poor diversification

The 3 months correlation between Boston and Piedmont is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Piedmont Office Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Office Realty 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 Piedmont Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Office Realty has no effect on the direction of Boston Properties i.e., Boston Properties and Piedmont Office go up and down completely randomly.

Pair Corralation between Boston Properties and Piedmont Office

Considering the 90-day investment horizon Boston Properties is expected to generate 0.87 times more return on investment than Piedmont Office. However, Boston Properties is 1.15 times less risky than Piedmont Office. It trades about 0.13 of its potential returns per unit of risk. Piedmont Office Realty is currently generating about 0.02 per unit of risk. If you would invest  7,342  in Boston Properties on September 1, 2024 and sell it today you would earn a total of  857.00  from holding Boston Properties or generate 11.67% return on investment over 90 days.

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

Boston Properties  vs.  Piedmont Office Realty

Boston Properties

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Properties are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Boston Properties may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Piedmont Office Realty

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Piedmont Office Realty are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Piedmont 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 Piedmont Office

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

The idea behind Boston Properties and Piedmont Office Realty 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.