Correlation Between Office Properties and Whitestone REIT

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

Diversification Opportunities for Office Properties and Whitestone REIT

-0.42

Correlation Coefficient

Office Properties  Whitestone REIT

Very good diversification

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

Pair Corralation between Office Properties and Whitestone REIT

Assuming the 90 days horizon Office Properties Income is expected to generate 1.4 times more return on investment than Whitestone REIT. However, Office Properties is 1.4 times more volatile than Whitestone REIT. It trades about 0.07 of its potential returns per unit of risk. Whitestone REIT is currently generating about -0.1 per unit of risk. If you would invest  1,201  in Office Properties Income on October 9, 2024 and sell it today you would earn a total of  34.00  from holding Office Properties Income or generate 2.83% 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.  Whitestone REIT

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 latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Whitestone REIT

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Whitestone REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Whitestone REIT is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Office Properties and Whitestone REIT

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

The idea behind Office Properties Income and Whitestone 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.