Correlation Between City Office and Franklin Street

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

Diversification Opportunities for City Office and Franklin Street

0.11

Correlation Coefficient

City Office  Franklin Street

Average diversification

The 3 months correlation between City and Franklin is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding City Office REIT and Franklin Street Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Street Prop 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 Franklin Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Street Prop has no effect on the direction of City Office i.e., City Office and Franklin Street go up and down completely randomly.

Pair Corralation between City Office and Franklin Street

Assuming the 90 days trading horizon City Office REIT is expected to under-perform the Franklin Street. But the preferred stock apears to be less risky and, when comparing its historical volatility, City Office REIT is 2.04 times less risky than Franklin Street. The preferred stock trades about -0.11 of its potential returns per unit of risk. The Franklin Street Properties is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Franklin Street Properties on December 26, 2024 and sell it today you would lose (2.00) from holding Franklin Street Properties or give up 1.06% of portfolio value over 90 days.

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

City Office REIT  vs.  Franklin Street Properties

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 latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Franklin Street Prop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Street Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franklin Street is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with City Office and Franklin Street

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

The idea behind City Office REIT and Franklin Street Properties 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.