Correlation Between SAFETY MEDICAL and CITY OFFICE

Can any of the company-specific risk be diversified away by investing in both SAFETY MEDICAL and CITY OFFICE 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 SAFETY MEDICAL and CITY OFFICE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SAFETY MEDICAL PROD and CITY OFFICE REIT, you can compare the effects of market volatilities on SAFETY MEDICAL and CITY OFFICE 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 SAFETY MEDICAL with a short position of CITY OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAFETY MEDICAL and CITY OFFICE.

Diversification Opportunities for SAFETY MEDICAL and CITY OFFICE

0.47

Correlation Coefficient

SAFETY MEDICAL  CITY OFFICE

Very weak diversification

The 3 months correlation between SAFETY and CITY is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding SAFETY MEDICAL PROD and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT and SAFETY MEDICAL 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 SAFETY MEDICAL PROD are associated (or correlated) with CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of SAFETY MEDICAL i.e., SAFETY MEDICAL and CITY OFFICE go up and down completely randomly.

Pair Corralation between SAFETY MEDICAL and CITY OFFICE

Assuming the 90 days trading horizon SAFETY MEDICAL PROD is expected to under-perform the CITY OFFICE. But the stock apears to be less risky and, when comparing its historical volatility, SAFETY MEDICAL PROD is 1.02 times less risky than CITY OFFICE. The stock trades about -0.19 of its potential returns per unit of risk. The CITY OFFICE REIT is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  486.00  in CITY OFFICE REIT on September 4, 2024 and sell it today you would earn a total of  39.00  from holding CITY OFFICE REIT or generate 8.02% return on investment over 90 days.

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

SAFETY MEDICAL PROD  vs.  CITY OFFICE REIT

SAFETY MEDICAL PROD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAFETY MEDICAL PROD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CITY OFFICE REIT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CITY OFFICE REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITY OFFICE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SAFETY MEDICAL and CITY OFFICE

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

The idea behind SAFETY MEDICAL PROD and CITY OFFICE 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.