Correlation Between AvalonBay Communities and City Office

Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities 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 AvalonBay Communities and City Office into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for AvalonBay Communities and City Office

-0.52

Correlation Coefficient

AvalonBay Communities  City Office

Excellent diversification

The 3 months correlation between AvalonBay and City is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and City Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office and AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities i.e., AvalonBay Communities and City Office go up and down completely randomly.

Pair Corralation between AvalonBay Communities and City Office

Considering the 90-day investment horizon AvalonBay Communities is expected to under-perform the City Office. But the stock apears to be less risky and, when comparing its historical volatility, AvalonBay Communities is 2.51 times less risky than City Office. The stock trades about -0.14 of its potential returns per unit of risk. The City Office is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  479.00  in City Office on May 5, 2025 and sell it today you would earn a total of  214.00  from holding City Office or generate 44.68% return on investment over 90 days.

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

AvalonBay Communities  vs.  City Office

AvalonBay Communities

Risk-Adjusted Performance

Very Weak

Over the last 90 days AvalonBay Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

City Office

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in City Office are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, City Office displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AvalonBay Communities and City Office

The main advantage of trading using opposite AvalonBay Communities and City Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities 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.

The idea behind AvalonBay Communities and City Office 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.