Correlation Between Douglas Emmett and 71713UAW2

Can any of the company-specific risk be diversified away by investing in both Douglas Emmett and 71713UAW2 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 71713UAW2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Douglas Emmett and PHARMACIA P 66, you can compare the effects of market volatilities on Douglas Emmett and 71713UAW2 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 71713UAW2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and 71713UAW2.

Diversification Opportunities for Douglas Emmett and 71713UAW2

-0.38

Correlation Coefficient

Douglas Emmett  71713UAW2

Very good diversification

The 3 months correlation between Douglas and 71713UAW2 is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and PHARMACIA P 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHARMACIA P 66 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 71713UAW2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHARMACIA P 66 has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and 71713UAW2 go up and down completely randomly.

Pair Corralation between Douglas Emmett and 71713UAW2

Considering the 90-day investment horizon Douglas Emmett is expected to under-perform the 71713UAW2. In addition to that, Douglas Emmett is 2.08 times more volatile than PHARMACIA P 66. It trades about -0.14 of its total potential returns per unit of risk. PHARMACIA P 66 is currently generating about 0.11 per unit of volatility. If you would invest  10,764  in PHARMACIA P 66 on October 9, 2024 and sell it today you would earn a total of  185.00  from holding PHARMACIA P 66 or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.42%
Values	Daily Returns

Douglas Emmett  vs.  PHARMACIA P 66

Douglas Emmett

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Emmett are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Douglas Emmett may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PHARMACIA P 66

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHARMACIA P 66 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 71713UAW2 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 71713UAW2

The main advantage of trading using opposite Douglas Emmett and 71713UAW2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett position performs unexpectedly, 71713UAW2 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 71713UAW2 will offset losses from the drop in 71713UAW2's long position.

The idea behind Douglas Emmett and PHARMACIA P 66 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.