Correlation Between Douglas Emmett and Paramount
Can any of the company-specific risk be diversified away by investing in both Douglas Emmett and Paramount 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 Paramount into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Douglas Emmett and Paramount Group, you can compare the effects of market volatilities on Douglas Emmett and Paramount 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 Paramount. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and Paramount.
Diversification Opportunities for Douglas Emmett and Paramount
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Douglas and Paramount is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and Paramount Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Group 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 Paramount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Group has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and Paramount go up and down completely randomly.
Pair Corralation between Douglas Emmett and Paramount
Considering the 90-day investment horizon Douglas Emmett is expected to generate 1.01 times more return on investment than Paramount. However, Douglas Emmett is 1.01 times more volatile than Paramount Group. It trades about 0.18 of its potential returns per unit of risk. Paramount Group is currently generating about -0.06 per unit of risk. If you would invest 1,826 in Douglas Emmett on August 31, 2024 and sell it today you would earn a total of 132.00 from holding Douglas Emmett or generate 7.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Douglas Emmett vs. Paramount Group
Performance |
| Timeline |
| Douglas Emmett |
| Paramount Group |
Douglas Emmett and Paramount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Douglas Emmett and Paramount
The main advantage of trading using opposite Douglas Emmett and Paramount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett position performs unexpectedly, Paramount 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 Paramount will offset losses from the drop in Paramount's long position.| Douglas Emmett vs. Brandywine Realty Trust | Douglas Emmett vs. Kilroy Realty Corp | Douglas Emmett vs. Piedmont Office Realty | Douglas Emmett vs. City Office |
| Paramount vs. Highwoods Properties | Paramount vs. Piedmont Office Realty | Paramount vs. Douglas Emmett | Paramount 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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