Correlation Between Corporate Office and CITY OFFICE

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

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

Diversification Opportunities for Corporate Office and CITY OFFICE

-0.19

Correlation Coefficient

Corporate Office  CITY OFFICE

Good diversification

The 3 months correlation between Corporate and CITY is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties 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 Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and CITY OFFICE go up and down completely randomly.

Pair Corralation between Corporate Office and CITY OFFICE

Assuming the 90 days horizon Corporate Office Properties is expected to generate 0.42 times more return on investment than CITY OFFICE. However, Corporate Office Properties is 2.4 times less risky than CITY OFFICE. It trades about 0.21 of its potential returns per unit of risk. CITY OFFICE REIT is currently generating about 0.05 per unit of risk. If you would invest  2,631  in Corporate Office Properties on September 2, 2024 and sell it today you would earn a total of  449.00  from holding Corporate Office Properties or generate 17.07% return on investment over 90 days.

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

Corporate Office Properties  vs.  CITY OFFICE REIT

Corporate Office Pro

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Office Properties are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Corporate Office reported solid returns over the last few months and may actually be approaching a breakup point.

CITY OFFICE REIT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CITY OFFICE REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CITY OFFICE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Corporate Office and CITY OFFICE

The main advantage of trading using opposite Corporate Office and CITY OFFICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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 Corporate Office Properties 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.