Correlation Between CITY OFFICE and Flight Centre

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Can any of the company-specific risk be diversified away by investing in both CITY OFFICE and Flight Centre 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 CITY OFFICE and Flight Centre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITY OFFICE REIT and Flight Centre Travel, you can compare the effects of market volatilities on CITY OFFICE and Flight Centre 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 CITY OFFICE with a short position of Flight Centre. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and Flight Centre.

Diversification Opportunities for CITY OFFICE and Flight Centre

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between CITY and Flight is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Flight Centre Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flight Centre Travel and CITY 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 CITY OFFICE REIT are associated (or correlated) with Flight Centre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flight Centre Travel has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and Flight Centre go up and down completely randomly.

Pair Corralation between CITY OFFICE and Flight Centre

Assuming the 90 days horizon CITY OFFICE REIT is expected to generate 1.66 times more return on investment than Flight Centre. However, CITY OFFICE is 1.66 times more volatile than Flight Centre Travel. It trades about 0.03 of its potential returns per unit of risk. Flight Centre Travel is currently generating about -0.02 per unit of risk. If you would invest  447.00  in CITY OFFICE REIT on September 12, 2024 and sell it today you would earn a total of  78.00  from holding CITY OFFICE REIT or generate 17.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.72%
ValuesDaily Returns

CITY OFFICE REIT  vs.  Flight Centre Travel

 Performance 
       Timeline  
CITY OFFICE REIT 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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 fragile basic indicators, CITY OFFICE may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Flight Centre Travel 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Flight Centre Travel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CITY OFFICE and Flight Centre Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CITY OFFICE and Flight Centre

The main advantage of trading using opposite CITY OFFICE and Flight Centre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE position performs unexpectedly, Flight Centre 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 Flight Centre will offset losses from the drop in Flight Centre's long position.
The idea behind CITY OFFICE REIT and Flight Centre Travel 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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