Correlation Between Douglas Emmett and Brandywine Realty

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

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

Diversification Opportunities for Douglas Emmett and Brandywine Realty

0.91

Correlation Coefficient

Douglas Emmett  Brandywine Realty

Almost no diversification

The 3 months correlation between Douglas and Brandywine is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett 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 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 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 Douglas Emmett i.e., Douglas Emmett and Brandywine Realty go up and down completely randomly.

Pair Corralation between Douglas Emmett and Brandywine Realty

Considering the 90-day investment horizon Douglas Emmett is expected to generate 0.43 times more return on investment than Brandywine Realty. However, Douglas Emmett is 2.34 times less risky than Brandywine Realty. It trades about 0.22 of its potential returns per unit of risk. Brandywine Realty Trust is currently generating about 0.07 per unit of risk. 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 Strong
Accuracy	100.0%
Values	Daily Returns

Douglas Emmett  vs.  Brandywine Realty Trust

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.

Brandywine Realty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brandywine Realty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Brandywine Realty may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Douglas Emmett and Brandywine Realty

The main advantage of trading using opposite Douglas Emmett and Brandywine Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett 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 Douglas Emmett 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.