Correlation Between COPT Defense and City Office

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

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

Diversification Opportunities for COPT Defense and City Office

-0.17

Correlation Coefficient

COPT Defense  City Office

Good diversification

The 3 months correlation between COPT and City is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding COPT Defense Properties and City Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office and COPT Defense 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 COPT Defense 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 COPT Defense i.e., COPT Defense and City Office go up and down completely randomly.

Pair Corralation between COPT Defense and City Office

Considering the 90-day investment horizon COPT Defense Properties is expected to generate 0.5 times more return on investment than City Office. However, COPT Defense Properties is 2.01 times less risky than City Office. It trades about 0.13 of its potential returns per unit of risk. City Office is currently generating about -0.02 per unit of risk. If you would invest  2,981  in COPT Defense Properties on September 13, 2024 and sell it today you would earn a total of  282.00  from holding COPT Defense Properties or generate 9.46% return on investment over 90 days.

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

COPT Defense Properties  vs.  City Office

COPT Defense Properties

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental indicators, COPT Defense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 COPT Defense and City Office

The main advantage of trading using opposite COPT Defense and City Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COPT Defense 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 COPT Defense 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.