Correlation Between Stagwell and Hudson Pacific

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

By analyzing existing cross correlation between Stagwell and Hudson Pacific Properties, you can compare the effects of market volatilities on Stagwell and Hudson Pacific 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 Stagwell with a short position of Hudson Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stagwell and Hudson Pacific.

Diversification Opportunities for Stagwell and Hudson Pacific

0.21

Correlation Coefficient

Stagwell  Hudson Pacific

Modest diversification

The 3 months correlation between Stagwell and Hudson is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell and Hudson Pacific Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Pacific Properties and Stagwell 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 Stagwell are associated (or correlated) with Hudson Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Pacific Properties has no effect on the direction of Stagwell i.e., Stagwell and Hudson Pacific go up and down completely randomly.

Pair Corralation between Stagwell and Hudson Pacific

Given the investment horizon of 90 days Stagwell is expected to under-perform the Hudson Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Stagwell is 1.72 times less risky than Hudson Pacific. The stock trades about -0.05 of its potential returns per unit of risk. The Hudson Pacific Properties is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  303.00  in Hudson Pacific Properties on December 26, 2024 and sell it today you would lose (11.00) from holding Hudson Pacific Properties or give up 3.63% of portfolio value over 90 days.

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

Stagwell  vs.  Hudson Pacific Properties

Stagwell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Hudson Pacific Properties

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Stagwell and Hudson Pacific

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

The idea behind Stagwell and Hudson Pacific Properties 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.