Correlation Between Corporate Office and City Office

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

By analyzing existing cross correlation between Corporate Office Properties and City Office REIT, you can compare the effects of market volatilities on Corporate Office 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 Corporate Office with a short position of City Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and City Office.

Diversification Opportunities for Corporate Office and City Office

0.0

Correlation Coefficient

Corporate Office  City Office

Pay attention - limited upside

The 3 months correlation between Corporate and City is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties 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 Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and City Office go up and down completely randomly.

Pair Corralation between Corporate Office and City Office

If you would invest (100.00) in Corporate Office Properties on December 4, 2024 and sell it today you would earn a total of  100.00  from holding Corporate Office Properties or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Corporate Office Properties  vs.  City Office REIT

Corporate Office Pro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Corporate Office is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 somewhat strong basic indicators, City Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Corporate Office and City Office

The main advantage of trading using opposite Corporate Office and City Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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 Corporate Office Properties 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.

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