Correlation Between Office Properties and DHCNI

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

Diversification Opportunities for Office Properties and DHCNI

0.53

Correlation Coefficient

Office Properties  DHCNI

Very weak diversification

The 3 months correlation between Office and DHCNI is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and DHCNI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHCNI 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 DHCNI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHCNI has no effect on the direction of Office Properties i.e., Office Properties and DHCNI go up and down completely randomly.

Pair Corralation between Office Properties and DHCNI

Assuming the 90 days horizon Office Properties is expected to generate 10.51 times less return on investment than DHCNI. In addition to that, Office Properties is 1.82 times more volatile than DHCNI. It trades about 0.0 of its total potential returns per unit of risk. DHCNI is currently generating about 0.06 per unit of volatility. If you would invest  1,409  in DHCNI on September 3, 2024 and sell it today you would earn a total of  77.00  from holding DHCNI or generate 5.46% return on investment over 90 days.

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

Office Properties Income  vs.  DHCNI

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 quite persistent basic indicators, Office Properties is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

DHCNI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DHCNI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, DHCNI is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Office Properties and DHCNI

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

The idea behind Office Properties Income and DHCNI 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.