Correlation Between Japan Real and Kilroy Realty

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

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

Diversification Opportunities for Japan Real and Kilroy Realty

-0.75

Correlation Coefficient

Japan Real  Kilroy Realty

Pay attention - limited upside

The 3 months correlation between Japan and Kilroy is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Japan Real Estate 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 Japan Real 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 Japan Real Estate 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 Japan Real i.e., Japan Real and Kilroy Realty go up and down completely randomly.

Pair Corralation between Japan Real and Kilroy Realty

Assuming the 90 days horizon Japan Real Estate is expected to under-perform the Kilroy Realty. But the stock apears to be less risky and, when comparing its historical volatility, Japan Real Estate is 1.9 times less risky than Kilroy Realty. The stock trades about -0.04 of its potential returns per unit of risk. The Kilroy Realty Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,131  in Kilroy Realty Corp on September 4, 2024 and sell it today you would earn a total of  769.00  from holding Kilroy Realty Corp or generate 24.56% return on investment over 90 days.

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

Japan Real Estate  vs.  Kilroy Realty Corp

Japan Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kilroy Realty Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kilroy Realty Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kilroy Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Real and Kilroy Realty

The main advantage of trading using opposite Japan Real and Kilroy Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Real 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 Japan Real Estate 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.