Correlation Between Boston Properties and Fortescue

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

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

Diversification Opportunities for Boston Properties and Fortescue

0.15

Correlation Coefficient

Boston Properties  Fortescue

Average diversification

The 3 months correlation between Boston and Fortescue is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals 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 Fortescue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Boston Properties i.e., Boston Properties and Fortescue go up and down completely randomly.

Pair Corralation between Boston Properties and Fortescue

Considering the 90-day investment horizon Boston Properties is expected to under-perform the Fortescue. In addition to that, Boston Properties is 8.0 times more volatile than Fortescue Metals Group. It trades about -0.04 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about 0.04 per unit of volatility. If you would invest  9,700  in Fortescue Metals Group on December 2, 2024 and sell it today you would earn a total of  37.00  from holding Fortescue Metals Group or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Boston Properties  vs.  Fortescue Metals Group

Boston Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Fortescue Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortescue Metals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fortescue is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Properties and Fortescue

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

The idea behind Boston Properties and Fortescue Metals Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.