Correlation Between COPT Defense and American Assets

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

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

Diversification Opportunities for COPT Defense and American Assets

0.87

Correlation Coefficient

COPT Defense  American Assets

Very poor diversification

The 3 months correlation between COPT and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding COPT Defense Properties and American Assets Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Assets Trust and COPT Defense 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 COPT Defense Properties are associated (or correlated) with American Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Assets Trust has no effect on the direction of COPT Defense i.e., COPT Defense and American Assets go up and down completely randomly.

Pair Corralation between COPT Defense and American Assets

Considering the 90-day investment horizon COPT Defense Properties is expected to generate 0.73 times more return on investment than American Assets. However, COPT Defense Properties is 1.37 times less risky than American Assets. It trades about 0.02 of its potential returns per unit of risk. American Assets Trust is currently generating about -0.02 per unit of risk. If you would invest  2,350  in COPT Defense Properties on January 12, 2025 and sell it today you would earn a total of  170.00  from holding COPT Defense Properties or generate 7.23% return on investment over 90 days.

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

COPT Defense Properties  vs.  American Assets Trust

COPT Defense Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days COPT Defense Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in May 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

American Assets Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Assets Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with COPT Defense and American Assets

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

The idea behind COPT Defense Properties and American Assets 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.