Correlation Between City Office and Boston Properties
Can any of the company-specific risk be diversified away by investing in both City Office and Boston 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 City Office and Boston Properties 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 Boston Properties, you can compare the effects of market volatilities on City Office and Boston 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 City Office with a short position of Boston Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Office and Boston Properties.
Diversification Opportunities for City Office and Boston Properties
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between City and Boston is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding City Office REIT and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties 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 Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of City Office i.e., City Office and Boston Properties go up and down completely randomly.
Pair Corralation between City Office and Boston Properties
Assuming the 90 days trading horizon City Office is expected to generate 1.71 times less return on investment than Boston Properties. But when comparing it to its historical volatility, City Office REIT is 1.39 times less risky than Boston Properties. It trades about 0.03 of its potential returns per unit of risk. Boston Properties is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,967 in Boston Properties on September 2, 2024 and sell it today you would earn a total of 2,232 from holding Boston Properties or generate 37.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
City Office REIT vs. Boston Properties
Performance |
| Timeline |
| City Office REIT |
| Boston Properties |
City Office and Boston Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Office and Boston Properties
The main advantage of trading using opposite City Office and Boston Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Office position performs unexpectedly, Boston 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 Boston Properties will offset losses from the drop in Boston Properties' long position.| City Office vs. Vornado Realty Trust | City Office vs. Vornado Realty Trust | City Office vs. SL Green Realty | City Office vs. Hudson Pacific Properties |
| Boston Properties vs. Douglas Emmett | Boston Properties vs. Vornado Realty Trust | Boston Properties vs. Highwoods Properties | Boston Properties vs. Piedmont Office Realty |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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