Correlation Between Kilroy Realty and Japan Real

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

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

Diversification Opportunities for Kilroy Realty and Japan Real

-0.76

Correlation Coefficient

Kilroy Realty  Japan Real

Pay attention - limited upside

The 3 months correlation between Kilroy and Japan is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kilroy Realty Corp and Japan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Real Estate and Kilroy Realty 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 Kilroy Realty Corp are associated (or correlated) with Japan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Real Estate has no effect on the direction of Kilroy Realty i.e., Kilroy Realty and Japan Real go up and down completely randomly.

Pair Corralation between Kilroy Realty and Japan Real

Assuming the 90 days horizon Kilroy Realty Corp is expected to generate 1.91 times more return on investment than Japan Real. However, Kilroy Realty is 1.91 times more volatile than Japan Real Estate. It trades about 0.16 of its potential returns per unit of risk. Japan Real Estate is currently generating about -0.02 per unit of risk. If you would invest  3,170  in Kilroy Realty Corp on September 2, 2024 and sell it today you would earn a total of  690.00  from holding Kilroy Realty Corp or generate 21.77% return on investment over 90 days.

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

Kilroy Realty Corp  vs.  Japan Real Estate

Kilroy Realty Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kilroy Realty Corp are ranked lower than 12 (%) 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.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kilroy Realty and Japan Real

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

The idea behind Kilroy Realty Corp and Japan Real Estate 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.