Correlation Between Vornado Realty and Highwoods Properties

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

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

Diversification Opportunities for Vornado Realty and Highwoods Properties

0.6

Correlation Coefficient

Vornado Realty  Highwoods Properties

Poor diversification

The 3 months correlation between Vornado and Highwoods is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vornado Realty Trust and Highwoods Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwoods Properties and Vornado Realty 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 Vornado Realty Trust are associated (or correlated) with Highwoods Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwoods Properties has no effect on the direction of Vornado Realty i.e., Vornado Realty and Highwoods Properties go up and down completely randomly.

Pair Corralation between Vornado Realty and Highwoods Properties

Considering the 90-day investment horizon Vornado Realty Trust is expected to generate 1.44 times more return on investment than Highwoods Properties. However, Vornado Realty is 1.44 times more volatile than Highwoods Properties. It trades about 0.25 of its potential returns per unit of risk. Highwoods Properties is currently generating about 0.06 per unit of risk. If you would invest  3,353  in Vornado Realty Trust on August 31, 2024 and sell it today you would earn a total of  990.00  from holding Vornado Realty Trust or generate 29.53% return on investment over 90 days.

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

Vornado Realty Trust  vs.  Highwoods Properties

Vornado Realty Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vornado Realty Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vornado Realty displayed solid returns over the last few months and may actually be approaching a breakup point.

Highwoods Properties

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highwoods Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Highwoods Properties is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vornado Realty and Highwoods Properties

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

The idea behind Vornado Realty Trust and Highwoods 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.