Correlation Between Easterly Government and Office Properties

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

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

Diversification Opportunities for Easterly Government and Office Properties

0.44

Correlation Coefficient

Easterly Government  Office Properties

Very weak diversification

The 3 months correlation between Easterly and Office is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Easterly Government Properties and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income and Easterly Government 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 Easterly Government Properties are associated (or correlated) with Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of Easterly Government i.e., Easterly Government and Office Properties go up and down completely randomly.

Pair Corralation between Easterly Government and Office Properties

Assuming the 90 days horizon Easterly Government Properties is expected to generate 0.22 times more return on investment than Office Properties. However, Easterly Government Properties is 4.57 times less risky than Office Properties. It trades about -0.31 of its potential returns per unit of risk. Office Properties Income is currently generating about -0.3 per unit of risk. If you would invest  1,152  in Easterly Government Properties on September 27, 2024 and sell it today you would lose (103.00) from holding Easterly Government Properties or give up 8.94% of portfolio value over 90 days.

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

Easterly Government Properties  vs.  Office Properties Income

Easterly Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Easterly Government Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Office Properties Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Easterly Government and Office Properties

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

The idea behind Easterly Government Properties and Office Properties Income 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.