Correlation Between Postal Realty and City Office
Can any of the company-specific risk be diversified away by investing in both Postal Realty and City Office 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 Postal Realty and City Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Postal Realty Trust and City Office, you can compare the effects of market volatilities on Postal Realty and City Office 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 Postal Realty with a short position of City Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postal Realty and City Office.
Diversification Opportunities for Postal Realty and City Office
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Postal and City is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Postal Realty Trust and City Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office and Postal Realty 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 Postal Realty Trust are associated (or correlated) with City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office has no effect on the direction of Postal Realty i.e., Postal Realty and City Office go up and down completely randomly.
Pair Corralation between Postal Realty and City Office
Given the investment horizon of 90 days Postal Realty Trust is expected to generate 0.54 times more return on investment than City Office. However, Postal Realty Trust is 1.86 times less risky than City Office. It trades about -0.11 of its potential returns per unit of risk. City Office is currently generating about -0.06 per unit of risk. If you would invest 1,439 in Postal Realty Trust on August 28, 2024 and sell it today you would lose (45.00) from holding Postal Realty Trust or give up 3.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Postal Realty Trust vs. City Office
Performance |
| Timeline |
| Postal Realty Trust |
| City Office |
Postal Realty and City Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Postal Realty and City Office
The main advantage of trading using opposite Postal Realty and City Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postal Realty position performs unexpectedly, City Office 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 City Office will offset losses from the drop in City Office's long position.| Postal Realty vs. Office Properties Income | Postal Realty vs. Boston Properties | Postal Realty vs. SL Green Realty | Postal Realty vs. Alexandria Real Estate |
| City Office vs. Hudson Pacific Properties | City Office vs. Piedmont Office Realty | City Office vs. Office Properties Income | City Office 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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