Correlation Between Boston Properties and Vornado Realty

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

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

Diversification Opportunities for Boston Properties and Vornado Realty

0.87

Correlation Coefficient

Boston Properties  Vornado Realty

Very poor diversification

The 3 months correlation between Boston and Vornado is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Vornado Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vornado Realty Trust 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 Vornado Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vornado Realty Trust has no effect on the direction of Boston Properties i.e., Boston Properties and Vornado Realty go up and down completely randomly.

Pair Corralation between Boston Properties and Vornado Realty

Considering the 90-day investment horizon Boston Properties is expected to generate 0.81 times more return on investment than Vornado Realty. However, Boston Properties is 1.23 times less risky than Vornado Realty. It trades about -0.05 of its potential returns per unit of risk. Vornado Realty Trust is currently generating about -0.05 per unit of risk. If you would invest  7,319  in Boston Properties on December 28, 2024 and sell it today you would lose (487.00) from holding Boston Properties or give up 6.65% of portfolio value over 90 days.

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

Boston Properties  vs.  Vornado Realty Trust

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 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.

Vornado Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Boston Properties and Vornado Realty

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

The idea behind Boston Properties and Vornado Realty Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.