Correlation Between Boston Properties and Essential Properties

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

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

Diversification Opportunities for Boston Properties and Essential Properties

0.42

Correlation Coefficient

Boston Properties  Essential Properties

Very weak diversification

The 3 months correlation between Boston and Essential is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Essential Properties Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Properties 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 Essential Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Properties has no effect on the direction of Boston Properties i.e., Boston Properties and Essential Properties go up and down completely randomly.

Pair Corralation between Boston Properties and Essential Properties

Considering the 90-day investment horizon Boston Properties is expected to under-perform the Essential Properties. In addition to that, Boston Properties is 1.58 times more volatile than Essential Properties Realty. It trades about -0.17 of its total potential returns per unit of risk. Essential Properties Realty is currently generating about -0.21 per unit of volatility. If you would invest  3,350  in Essential Properties Realty on September 22, 2024 and sell it today you would lose (197.00) from holding Essential Properties Realty or give up 5.88% of portfolio value over 90 days.

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

Boston Properties  vs.  Essential Properties Realty

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 latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Essential Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essential Properties Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Boston Properties and Essential Properties

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

The idea behind Boston Properties and Essential Properties Realty 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.