Correlation Between Douglas Emmett and GENERAL

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

By analyzing existing cross correlation between Douglas Emmett and GENERAL ELEC CAP, you can compare the effects of market volatilities on Douglas Emmett and GENERAL 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 Douglas Emmett with a short position of GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and GENERAL.

Diversification Opportunities for Douglas Emmett and GENERAL

-0.45

Correlation Coefficient

Douglas Emmett  GENERAL

Very good diversification

The 3 months correlation between Douglas and GENERAL is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP and Douglas Emmett 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 Douglas Emmett are associated (or correlated) with GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and GENERAL go up and down completely randomly.

Pair Corralation between Douglas Emmett and GENERAL

Considering the 90-day investment horizon Douglas Emmett is expected to generate 4.69 times more return on investment than GENERAL. However, Douglas Emmett is 4.69 times more volatile than GENERAL ELEC CAP. It trades about 0.0 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.14 per unit of risk. If you would invest  1,715  in Douglas Emmett on October 10, 2024 and sell it today you would lose (25.00) from holding Douglas Emmett or give up 1.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Douglas Emmett  vs.  GENERAL ELEC CAP

Douglas Emmett

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Douglas Emmett and GENERAL

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

The idea behind Douglas Emmett and GENERAL ELEC CAP 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.