Correlation Between Hudson Pacific and City Office

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

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

Diversification Opportunities for Hudson Pacific and City Office

-0.22

Correlation Coefficient

Hudson Pacific  City Office

Very good diversification

The 3 months correlation between Hudson and City is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties 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 Hudson Pacific 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 Hudson Pacific Properties 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 Hudson Pacific i.e., Hudson Pacific and City Office go up and down completely randomly.

Pair Corralation between Hudson Pacific and City Office

Considering the 90-day investment horizon Hudson Pacific Properties is expected to under-perform the City Office. In addition to that, Hudson Pacific is 3.32 times more volatile than City Office REIT. It trades about -0.16 of its total potential returns per unit of risk. City Office REIT is currently generating about 0.33 per unit of volatility. If you would invest  1,808  in City Office REIT on September 15, 2024 and sell it today you would earn a total of  190.00  from holding City Office REIT or generate 10.51% return on investment over 90 days.

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

Hudson Pacific Properties  vs.  City Office REIT

Hudson Pacific Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Pacific Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

City Office REIT

Risk-Adjusted Performance

4 of 100

Insignificant

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 somewhat strong basic indicators, City Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hudson Pacific and City Office

The main advantage of trading using opposite Hudson Pacific and City Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Pacific 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 Hudson Pacific Properties 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..