Correlation Between Boston Properties and Equity Commonwealth

Can any of the company-specific risk be diversified away by investing in both Boston Properties and Equity Commonwealth 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 Boston Properties and Equity Commonwealth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boston Properties and Equity Commonwealth, you can compare the effects of market volatilities on Boston Properties and Equity Commonwealth 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 Boston Properties with a short position of Equity Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Properties and Equity Commonwealth.

Diversification Opportunities for Boston Properties and Equity Commonwealth

0.13

Correlation Coefficient

Boston Properties  Equity Commonwealth

Average diversification

The 3 months correlation between Boston and Equity is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth and Boston Properties 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 Boston Properties are associated (or correlated) with Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of Boston Properties i.e., Boston Properties and Equity Commonwealth go up and down completely randomly.

Pair Corralation between Boston Properties and Equity Commonwealth

Considering the 90-day investment horizon Boston Properties is expected to under-perform the Equity Commonwealth. In addition to that, Boston Properties is 9.07 times more volatile than Equity Commonwealth. It trades about -0.01 of its total potential returns per unit of risk. Equity Commonwealth is currently generating about 0.1 per unit of volatility. If you would invest  2,471  in Equity Commonwealth on February 5, 2024 and sell it today you would earn a total of  14.00  from holding Equity Commonwealth or generate 0.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Boston Properties  vs.  Equity Commonwealth

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Boston Properties is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Equity Commonwealth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Commonwealth are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Equity Commonwealth is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Boston Properties and Equity Commonwealth

The main advantage of trading using opposite Boston Properties and Equity Commonwealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Properties position performs unexpectedly, Equity Commonwealth 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 Equity Commonwealth will offset losses from the drop in Equity Commonwealth's long position.

The idea behind Boston Properties and Equity Commonwealth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..