Correlation Between Franklin Street and JBG SMITH

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

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

Diversification Opportunities for Franklin Street and JBG SMITH

0.2

Correlation Coefficient

Franklin Street  JBG SMITH

Modest diversification

The 3 months correlation between Franklin and JBG is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Street Properties and JBG SMITH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBG SMITH Properties and Franklin Street 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 Franklin Street Properties are associated (or correlated) with JBG SMITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBG SMITH Properties has no effect on the direction of Franklin Street i.e., Franklin Street and JBG SMITH go up and down completely randomly.

Pair Corralation between Franklin Street and JBG SMITH

Considering the 90-day investment horizon Franklin Street Properties is expected to under-perform the JBG SMITH. But the stock apears to be less risky and, when comparing its historical volatility, Franklin Street Properties is 1.0 times less risky than JBG SMITH. The stock trades about -0.01 of its potential returns per unit of risk. The JBG SMITH Properties is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,506  in JBG SMITH Properties on December 27, 2024 and sell it today you would earn a total of  76.00  from holding JBG SMITH Properties or generate 5.05% return on investment over 90 days.

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

Franklin Street Properties  vs.  JBG SMITH Properties

Franklin Street Prop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Street Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franklin Street is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

JBG SMITH Properties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JBG SMITH Properties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, JBG SMITH may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Franklin Street and JBG SMITH

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

The idea behind Franklin Street Properties and JBG SMITH 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.