Correlation Between Hudson Pacific and Highwoods Properties
Can any of the company-specific risk be diversified away by investing in both Hudson Pacific and Highwoods 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 Hudson Pacific and Highwoods Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hudson Pacific Properties and Highwoods Properties, you can compare the effects of market volatilities on Hudson Pacific and Highwoods 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 Hudson Pacific with a short position of Highwoods Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hudson Pacific and Highwoods Properties.
Diversification Opportunities for Hudson Pacific and Highwoods Properties
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hudson and Highwoods is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties and Highwoods Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwoods Properties and Hudson Pacific 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 Hudson Pacific Properties are associated (or correlated) with Highwoods Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwoods Properties has no effect on the direction of Hudson Pacific i.e., Hudson Pacific and Highwoods Properties go up and down completely randomly.
Pair Corralation between Hudson Pacific and Highwoods Properties
Assuming the 90 days trading horizon Hudson Pacific is expected to generate 1.82 times less return on investment than Highwoods Properties. But when comparing it to its historical volatility, Hudson Pacific Properties is 1.21 times less risky than Highwoods Properties. It trades about 0.09 of its potential returns per unit of risk. Highwoods Properties is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,622 in Highwoods Properties on August 24, 2024 and sell it today you would earn a total of 1,574 from holding Highwoods Properties or generate 97.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hudson Pacific Properties vs. Highwoods Properties
Performance |
| Timeline |
| Hudson Pacific Properties |
| Highwoods Properties |
Hudson Pacific and Highwoods Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hudson Pacific and Highwoods Properties
The main advantage of trading using opposite Hudson Pacific and Highwoods Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Pacific position performs unexpectedly, Highwoods 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 Highwoods Properties will offset losses from the drop in Highwoods Properties' long position.| Hudson Pacific vs. Vornado Realty Trust | Hudson Pacific vs. Vornado Realty Trust | Hudson Pacific vs. SL Green Realty | Hudson Pacific vs. Vornado Realty Trust |
| Highwoods Properties vs. Piedmont Office Realty | Highwoods Properties vs. Douglas Emmett | Highwoods Properties vs. Kilroy Realty Corp | Highwoods Properties vs. Hudson Pacific Properties |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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