Correlation Between City Office and Brandywine Realty

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

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

Diversification Opportunities for City Office and Brandywine Realty

0.43

Correlation Coefficient

City Office  Brandywine Realty

Very weak diversification

The 3 months correlation between City and Brandywine is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding City Office REIT and Brandywine Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandywine Realty Trust and City Office 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 City Office REIT are associated (or correlated) with Brandywine Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandywine Realty Trust has no effect on the direction of City Office i.e., City Office and Brandywine Realty go up and down completely randomly.

Pair Corralation between City Office and Brandywine Realty

Assuming the 90 days trading horizon City Office REIT is expected to generate 0.37 times more return on investment than Brandywine Realty. However, City Office REIT is 2.71 times less risky than Brandywine Realty. It trades about 0.07 of its potential returns per unit of risk. Brandywine Realty Trust is currently generating about -0.28 per unit of risk. If you would invest  1,851  in City Office REIT on December 5, 2024 and sell it today you would earn a total of  20.00  from holding City Office REIT or generate 1.08% return on investment over 90 days.

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

City Office REIT  vs.  Brandywine Realty Trust

City Office REIT

Risk-Adjusted Performance

Very Weak

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

Brandywine Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brandywine Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with City Office and Brandywine Realty

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

The idea behind City Office REIT and Brandywine 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.