Correlation Between Douglas Emmett and Office Properties
Can any of the company-specific risk be diversified away by investing in both Douglas Emmett and Office 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 Douglas Emmett and Office Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Douglas Emmett and Office Properties Income, you can compare the effects of market volatilities on Douglas Emmett and Office 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 Douglas Emmett with a short position of Office Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and Office Properties.
Diversification Opportunities for Douglas Emmett and Office Properties
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Douglas and Office is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income and Douglas Emmett 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 Douglas Emmett are associated (or correlated) with Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and Office Properties go up and down completely randomly.
Pair Corralation between Douglas Emmett and Office Properties
Considering the 90-day investment horizon Douglas Emmett is expected to generate 0.55 times more return on investment than Office Properties. However, Douglas Emmett is 1.81 times less risky than Office Properties. It trades about 0.03 of its potential returns per unit of risk. Office Properties Income is currently generating about -0.08 per unit of risk. If you would invest 1,435 in Douglas Emmett on August 25, 2024 and sell it today you would earn a total of 468.00 from holding Douglas Emmett or generate 32.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Douglas Emmett vs. Office Properties Income
Performance |
| Timeline |
| Douglas Emmett |
| Office Properties Income |
Douglas Emmett and Office Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Douglas Emmett and Office Properties
The main advantage of trading using opposite Douglas Emmett and Office Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett position performs unexpectedly, Office 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 Office Properties will offset losses from the drop in Office Properties' long position.| Douglas Emmett vs. Boston Properties | Douglas Emmett vs. Alexandria Real Estate | Douglas Emmett vs. Vornado Realty Trust | Douglas Emmett vs. Highwoods Properties |
| Office Properties vs. Hudson Pacific Properties | Office Properties vs. Piedmont Office Realty | Office Properties vs. City Office | Office Properties vs. Kilroy Realty Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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