Correlation Between Office Properties and Kilroy Realty

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

Diversification Opportunities for Office Properties and Kilroy Realty

-0.42

Correlation Coefficient

Office Properties  Kilroy Realty

Very good diversification

The 3 months correlation between Office and Kilroy is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and Kilroy Realty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilroy Realty Corp 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 Kilroy Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilroy Realty Corp has no effect on the direction of Office Properties i.e., Office Properties and Kilroy Realty go up and down completely randomly.

Pair Corralation between Office Properties and Kilroy Realty

Considering the 90-day investment horizon Office Properties Income is expected to under-perform the Kilroy Realty. In addition to that, Office Properties is 3.91 times more volatile than Kilroy Realty Corp. It trades about -0.05 of its total potential returns per unit of risk. Kilroy Realty Corp is currently generating about 0.15 per unit of volatility. If you would invest  3,577  in Kilroy Realty Corp on August 30, 2024 and sell it today you would earn a total of  628.00  from holding Kilroy Realty Corp or generate 17.56% return on investment over 90 days.

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

Office Properties Income  vs.  Kilroy Realty Corp

Office Properties Income

Risk-Adjusted Performance

0 of 100

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 December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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. 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.

Pair Trading with Office Properties and Kilroy Realty

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

The idea behind Office Properties Income and Kilroy Realty Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.