Correlation Between Heidelberg Pharma and CITY OFFICE

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

By analyzing existing cross correlation between Heidelberg Pharma AG and CITY OFFICE REIT, you can compare the effects of market volatilities on Heidelberg Pharma and CITY OFFICE 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 Heidelberg Pharma with a short position of CITY OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heidelberg Pharma and CITY OFFICE.

Diversification Opportunities for Heidelberg Pharma and CITY OFFICE

-0.02

Correlation Coefficient

Heidelberg Pharma  CITY OFFICE

Good diversification

The 3 months correlation between Heidelberg and CITY is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Pharma AG and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT and Heidelberg Pharma 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 Heidelberg Pharma AG are associated (or correlated) with CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of Heidelberg Pharma i.e., Heidelberg Pharma and CITY OFFICE go up and down completely randomly.

Pair Corralation between Heidelberg Pharma and CITY OFFICE

Assuming the 90 days trading horizon Heidelberg Pharma AG is expected to under-perform the CITY OFFICE. But the stock apears to be less risky and, when comparing its historical volatility, Heidelberg Pharma AG is 1.36 times less risky than CITY OFFICE. The stock trades about -0.05 of its potential returns per unit of risk. The CITY OFFICE REIT is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  716.00  in CITY OFFICE REIT on October 11, 2024 and sell it today you would lose (196.00) from holding CITY OFFICE REIT or give up 27.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Heidelberg Pharma AG  vs.  CITY OFFICE REIT

Heidelberg Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

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

CITY OFFICE REIT

Risk-Adjusted Performance

4 of 100

Modest

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

Pair Trading with Heidelberg Pharma and CITY OFFICE

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

The idea behind Heidelberg Pharma AG and CITY OFFICE REIT 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.