Correlation Between Boston Properties and Brandywine Realty

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

By analyzing existing cross correlation between Boston Properties and Brandywine Realty Trust, you can compare the effects of market volatilities on Boston Properties and Brandywine Realty 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 Brandywine Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Properties and Brandywine Realty.

Diversification Opportunities for Boston Properties and Brandywine Realty

0.79

Correlation Coefficient

Boston Properties  Brandywine Realty

Poor diversification

The 3 months correlation between Boston and Brandywine is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Brandywine Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandywine Realty Trust 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 Brandywine Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandywine Realty Trust has no effect on the direction of Boston Properties i.e., Boston Properties and Brandywine Realty go up and down completely randomly.

Pair Corralation between Boston Properties and Brandywine Realty

Considering the 90-day investment horizon Boston Properties is expected to generate 0.53 times more return on investment than Brandywine Realty. However, Boston Properties is 1.88 times less risky than Brandywine Realty. It trades about 0.25 of its potential returns per unit of risk. Brandywine Realty Trust is currently generating about 0.1 per unit of risk. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Boston Properties  vs.  Brandywine Realty Trust

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.

Brandywine Realty Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brandywine Realty Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Brandywine Realty displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Properties and Brandywine Realty

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

The idea behind Boston Properties and Brandywine Realty Trust 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.