Correlation Between IND+COMMBK CHINA and CITY OFFICE

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

By analyzing existing cross correlation between INDCOMMBK CHINA ADR20 and CITY OFFICE REIT, you can compare the effects of market volatilities on IND+COMMBK CHINA 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 IND+COMMBK CHINA with a short position of CITY OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IND+COMMBK CHINA and CITY OFFICE.

Diversification Opportunities for IND+COMMBK CHINA and CITY OFFICE

-0.51

Correlation Coefficient

IND+COMMBK CHINA  CITY OFFICE

Excellent diversification

The 3 months correlation between IND+COMMBK and CITY is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding INDCOMMBK CHINA ADR20 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 IND+COMMBK CHINA 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 INDCOMMBK CHINA ADR20 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 IND+COMMBK CHINA i.e., IND+COMMBK CHINA and CITY OFFICE go up and down completely randomly.

Pair Corralation between IND+COMMBK CHINA and CITY OFFICE

Assuming the 90 days trading horizon INDCOMMBK CHINA ADR20 is expected to generate 0.67 times more return on investment than CITY OFFICE. However, INDCOMMBK CHINA ADR20 is 1.5 times less risky than CITY OFFICE. It trades about 0.06 of its potential returns per unit of risk. CITY OFFICE REIT is currently generating about -0.02 per unit of risk. If you would invest  1,208  in INDCOMMBK CHINA ADR20 on December 30, 2024 and sell it today you would earn a total of  72.00  from holding INDCOMMBK CHINA ADR20 or generate 5.96% return on investment over 90 days.

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

INDCOMMBK CHINA ADR20  vs.  CITY OFFICE REIT

INDCOMMBK CHINA ADR20

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INDCOMMBK CHINA ADR20 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, IND+COMMBK CHINA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CITY OFFICE REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITY OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CITY OFFICE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IND+COMMBK CHINA and CITY OFFICE

The main advantage of trading using opposite IND+COMMBK CHINA and CITY OFFICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IND+COMMBK CHINA 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 INDCOMMBK CHINA ADR20 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.