Correlation Between City Office and Douglas Emmett

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

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

Diversification Opportunities for City Office and Douglas Emmett

0.37

Correlation Coefficient

City Office  Douglas Emmett

Weak diversification

The 3 months correlation between City and Douglas is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding City Office and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett and City Office 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 City Office are associated (or correlated) with Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of City Office i.e., City Office and Douglas Emmett go up and down completely randomly.

Pair Corralation between City Office and Douglas Emmett

Considering the 90-day investment horizon City Office is expected to under-perform the Douglas Emmett. In addition to that, City Office is 1.37 times more volatile than Douglas Emmett. It trades about -0.03 of its total potential returns per unit of risk. Douglas Emmett is currently generating about 0.22 per unit of volatility. If you would invest  1,732  in Douglas Emmett on July 26, 2024 and sell it today you would earn a total of  131.00  from holding Douglas Emmett or generate 7.56% return on investment over 90 days.

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

City Office  vs.  Douglas Emmett

City Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, City Office is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Douglas Emmett

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Emmett are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, Douglas Emmett demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with City Office and Douglas Emmett

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

The idea behind City Office and Douglas Emmett 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..