Correlation Between Kilroy Realty and Terreno Realty

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

Diversification Opportunities for Kilroy Realty and Terreno Realty

-0.4

Correlation Coefficient

Kilroy Realty  Terreno Realty

Very good diversification

The 3 months correlation between Kilroy and Terreno is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kilroy Realty Corp and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty 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 Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of Kilroy Realty i.e., Kilroy Realty and Terreno Realty go up and down completely randomly.

Pair Corralation between Kilroy Realty and Terreno Realty

Considering the 90-day investment horizon Kilroy Realty Corp is expected to under-perform the Terreno Realty. In addition to that, Kilroy Realty is 1.52 times more volatile than Terreno Realty. It trades about -0.08 of its total potential returns per unit of risk. Terreno Realty is currently generating about 0.14 per unit of volatility. If you would invest  6,000  in Terreno Realty on November 30, 2024 and sell it today you would earn a total of  782.00  from holding Terreno Realty or generate 13.03% return on investment over 90 days.

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

Kilroy Realty Corp  vs.  Terreno Realty

Kilroy Realty Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kilroy Realty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Terreno Realty

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Terreno Realty are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Terreno Realty displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kilroy Realty and Terreno Realty

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

The idea behind Kilroy Realty Corp and Terreno Realty 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.