Correlation Between Eastern and Boston Properties

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

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

Diversification Opportunities for Eastern and Boston Properties

0.64

Correlation Coefficient

Eastern  Boston Properties

Poor diversification

The 3 months correlation between Eastern and Boston is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Eastern 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 Eastern Co are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Eastern i.e., Eastern and Boston Properties go up and down completely randomly.

Pair Corralation between Eastern and Boston Properties

Considering the 90-day investment horizon Eastern Co is expected to generate 1.26 times more return on investment than Boston Properties. However, Eastern is 1.26 times more volatile than Boston Properties. It trades about 0.03 of its potential returns per unit of risk. Boston Properties is currently generating about 0.03 per unit of risk. If you would invest  2,056  in Eastern Co on September 30, 2024 and sell it today you would earn a total of  601.00  from holding Eastern Co or generate 29.23% return on investment over 90 days.

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

Eastern Co  vs.  Boston Properties

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Eastern and Boston Properties

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

The idea behind Eastern Co and Boston 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.