Correlation Between Douglas Emmett and Alexandria Real

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

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

Diversification Opportunities for Douglas Emmett and Alexandria Real

0.03

Correlation Coefficient

Douglas Emmett  Alexandria Real

Significant diversification

The 3 months correlation between Douglas and Alexandria is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and Alexandria Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexandria Real Estate and Douglas Emmett 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 Douglas Emmett are associated (or correlated) with Alexandria Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexandria Real Estate has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and Alexandria Real go up and down completely randomly.

Pair Corralation between Douglas Emmett and Alexandria Real

Considering the 90-day investment horizon Douglas Emmett is expected to generate 1.2 times more return on investment than Alexandria Real. However, Douglas Emmett is 1.2 times more volatile than Alexandria Real Estate. It trades about 0.13 of its potential returns per unit of risk. Alexandria Real Estate is currently generating about -0.05 per unit of risk. If you would invest  1,383  in Douglas Emmett on August 15, 2024 and sell it today you would earn a total of  433.00  from holding Douglas Emmett or generate 31.31% return on investment over 90 days.

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

Douglas Emmett  vs.  Alexandria Real Estate

Douglas Emmett

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Emmett are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical and fundamental indicators, Douglas Emmett demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Alexandria Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alexandria Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Alexandria Real is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Douglas Emmett and Alexandria Real

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

The idea behind Douglas Emmett and Alexandria Real Estate 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.