Correlation Between Office Properties and Rithm Property

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

Diversification Opportunities for Office Properties and Rithm Property

0.07

Correlation Coefficient

Office Properties  Rithm Property

Significant diversification

The 3 months correlation between Office and Rithm is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and Rithm Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rithm Property 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 Rithm Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rithm Property Trust has no effect on the direction of Office Properties i.e., Office Properties and Rithm Property go up and down completely randomly.

Pair Corralation between Office Properties and Rithm Property

Assuming the 90 days horizon Office Properties Income is expected to generate 0.8 times more return on investment than Rithm Property. However, Office Properties Income is 1.24 times less risky than Rithm Property. It trades about 0.01 of its potential returns per unit of risk. Rithm Property Trust is currently generating about -0.04 per unit of risk. If you would invest  1,074  in Office Properties Income on November 20, 2024 and sell it today you would lose (24.00) from holding Office Properties Income or give up 2.23% of portfolio value over 90 days.

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

Office Properties Income  vs.  Rithm Property Trust

Office Properties Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Office Properties Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Office Properties disclosed solid returns over the last few months and may actually be approaching a breakup point.

Rithm Property Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Property Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Rithm Property may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Office Properties and Rithm Property

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

The idea behind Office Properties Income and Rithm Property 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.