Correlation Between Equity Commonwealth and Paramount

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

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

Diversification Opportunities for Equity Commonwealth and Paramount

0.28

Correlation Coefficient

Equity Commonwealth  Paramount

Modest diversification

The 3 months correlation between Equity and Paramount is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Equity Commonwealth and Paramount Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Group and Equity Commonwealth 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 Equity Commonwealth are associated (or correlated) with Paramount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Group has no effect on the direction of Equity Commonwealth i.e., Equity Commonwealth and Paramount go up and down completely randomly.

Pair Corralation between Equity Commonwealth and Paramount

Considering the 90-day investment horizon Equity Commonwealth is expected to under-perform the Paramount. In addition to that, Equity Commonwealth is 6.5 times more volatile than Paramount Group. It trades about -0.1 of its total potential returns per unit of risk. Paramount Group is currently generating about 0.0 per unit of volatility. If you would invest  489.00  in Paramount Group on October 1, 2024 and sell it today you would lose (4.00) from holding Paramount Group or give up 0.82% of portfolio value over 90 days.

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

Equity Commonwealth  vs.  Paramount Group

Equity Commonwealth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Commonwealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Paramount Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Equity Commonwealth and Paramount

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

The idea behind Equity Commonwealth and Paramount Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.