Correlation Between Office Properties and American Assets

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

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

Diversification Opportunities for Office Properties and American Assets

0.67

Correlation Coefficient

Office Properties  American Assets

Poor diversification

The 3 months correlation between Office and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and American Assets Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Assets Trust and Office Properties 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 Office Properties Income are associated (or correlated) with American Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Assets Trust has no effect on the direction of Office Properties i.e., Office Properties and American Assets go up and down completely randomly.

Pair Corralation between Office Properties and American Assets

Considering the 90-day investment horizon Office Properties Income is expected to under-perform the American Assets. In addition to that, Office Properties is 2.62 times more volatile than American Assets Trust. It trades about -0.21 of its total potential returns per unit of risk. American Assets Trust is currently generating about -0.21 per unit of volatility. If you would invest  2,561  in American Assets Trust on December 29, 2024 and sell it today you would lose (536.00) from holding American Assets Trust or give up 20.93% of portfolio value over 90 days.

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

Office Properties Income  vs.  American Assets Trust

Office Properties Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

American Assets Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Assets Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Office Properties and American Assets

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

The idea behind Office Properties Income and American Assets Trust 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.