Correlation Between Equity Commonwealth and Kilroy Realty

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

By analyzing existing cross correlation between Equity Commonwealth and Kilroy Realty Corp, you can compare the effects of market volatilities on Equity Commonwealth and Kilroy Realty 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 Equity Commonwealth with a short position of Kilroy Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Commonwealth and Kilroy Realty.

Diversification Opportunities for Equity Commonwealth and Kilroy Realty

-0.48

Correlation Coefficient

Equity Commonwealth  Kilroy Realty

Very good diversification

The 3 months correlation between Equity and Kilroy is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Equity Commonwealth and Kilroy Realty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilroy Realty Corp and Equity Commonwealth 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 Equity Commonwealth are associated (or correlated) with Kilroy Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilroy Realty Corp has no effect on the direction of Equity Commonwealth i.e., Equity Commonwealth and Kilroy Realty go up and down completely randomly.

Pair Corralation between Equity Commonwealth and Kilroy Realty

Considering the 90-day investment horizon Equity Commonwealth is expected to under-perform the Kilroy Realty. But the stock apears to be less risky and, when comparing its historical volatility, Equity Commonwealth is 3.42 times less risky than Kilroy Realty. The stock trades about 0.0 of its potential returns per unit of risk. The Kilroy Realty Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,577  in Kilroy Realty Corp on August 30, 2024 and sell it today you would earn a total of  628.00  from holding Kilroy Realty Corp or generate 17.56% return on investment over 90 days.

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

Equity Commonwealth  vs.  Kilroy Realty Corp

Equity Commonwealth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Commonwealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Equity Commonwealth is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Kilroy Realty Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kilroy Realty Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Kilroy Realty exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equity Commonwealth and Kilroy Realty

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

The idea behind Equity Commonwealth and Kilroy Realty Corp 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.