Correlation Between Alexandria Real and Boston Properties

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

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

Diversification Opportunities for Alexandria Real and Boston Properties

0.32

Correlation Coefficient

Alexandria Real  Boston Properties

Weak diversification

The 3 months correlation between Alexandria and Boston is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Alexandria Real 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 Alexandria Real Estate are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Alexandria Real i.e., Alexandria Real and Boston Properties go up and down completely randomly.

Pair Corralation between Alexandria Real and Boston Properties

Considering the 90-day investment horizon Alexandria Real is expected to generate 6.08 times less return on investment than Boston Properties. But when comparing it to its historical volatility, Alexandria Real Estate is 1.12 times less risky than Boston Properties. It trades about 0.05 of its potential returns per unit of risk. Boston Properties is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,638  in Boston Properties on August 12, 2024 and sell it today you would earn a total of  1,652  from holding Boston Properties or generate 24.89% return on investment over 90 days.

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

Alexandria Real Estate  vs.  Boston Properties

Alexandria Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alexandria Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Alexandria Real is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Boston Properties

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Properties are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Boston Properties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alexandria Real and Boston Properties

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

The idea behind Alexandria Real Estate and Boston Properties 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.