Correlation Between Douglas Emmett and COPT Defense

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

By analyzing existing cross correlation between Douglas Emmett and COPT Defense Properties, you can compare the effects of market volatilities on Douglas Emmett and COPT Defense 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 COPT Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and COPT Defense.

Diversification Opportunities for Douglas Emmett and COPT Defense

0.73

Correlation Coefficient

Douglas Emmett  COPT Defense

Poor diversification

The 3 months correlation between Douglas and COPT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and COPT Defense Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COPT Defense Properties 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 COPT Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COPT Defense Properties has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and COPT Defense go up and down completely randomly.

Pair Corralation between Douglas Emmett and COPT Defense

Considering the 90-day investment horizon Douglas Emmett is expected to generate 1.43 times more return on investment than COPT Defense. However, Douglas Emmett is 1.43 times more volatile than COPT Defense Properties. It trades about 0.13 of its potential returns per unit of risk. COPT Defense Properties is currently generating about 0.08 per unit of risk. If you would invest  1,403  in Douglas Emmett on April 26, 2025 and sell it today you would earn a total of  185.00  from holding Douglas Emmett or generate 13.19% return on investment over 90 days.

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

Douglas Emmett  vs.  COPT Defense Properties

Douglas Emmett

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Emmett are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Douglas Emmett demonstrated solid returns over the last few months and may actually be approaching a breakup point.

COPT Defense Properties

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, COPT Defense is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Douglas Emmett and COPT Defense

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

The idea behind Douglas Emmett and COPT Defense Properties 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.