Correlation Between Kilroy Realty and Equity Commonwealth

Can any of the company-specific risk be diversified away by investing in both Kilroy Realty and Equity Commonwealth 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 Equity Commonwealth 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 Equity Commonwealth, you can compare the effects of market volatilities on Kilroy Realty and Equity Commonwealth 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 Equity Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kilroy Realty and Equity Commonwealth.

Diversification Opportunities for Kilroy Realty and Equity Commonwealth

0.79

Correlation Coefficient

Kilroy Realty  Equity Commonwealth

Poor diversification

The 3 months correlation between Kilroy and Equity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kilroy Realty Corp and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth 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 Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of Kilroy Realty i.e., Kilroy Realty and Equity Commonwealth go up and down completely randomly.

Pair Corralation between Kilroy Realty and Equity Commonwealth

Considering the 90-day investment horizon Kilroy Realty Corp is expected to generate 9.8 times more return on investment than Equity Commonwealth. However, Kilroy Realty is 9.8 times more volatile than Equity Commonwealth. It trades about 0.17 of its potential returns per unit of risk. Equity Commonwealth is currently generating about 0.13 per unit of risk. If you would invest  3,475  in Kilroy Realty Corp on September 1, 2024 and sell it today you would earn a total of  678.00  from holding Kilroy Realty Corp or generate 19.51% return on investment over 90 days.

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

Kilroy Realty Corp  vs.  Equity Commonwealth

Kilroy Realty Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kilroy Realty Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Kilroy Realty exhibited solid returns over the last few months and may actually be approaching a breakup point.

Equity Commonwealth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Commonwealth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Equity Commonwealth is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kilroy Realty and Equity Commonwealth

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

The idea behind Kilroy Realty Corp and Equity Commonwealth 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 Global Correlations module to find global opportunities by holding instruments from different markets.