Correlation Between Highwoods Properties and Corporate Office

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

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

Diversification Opportunities for Highwoods Properties and Corporate Office

0.65

Correlation Coefficient

Highwoods Properties  Corporate Office

Poor diversification

The 3 months correlation between Highwoods and Corporate is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Highwoods Properties and Corporate Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Office Pro and Highwoods Properties 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 Highwoods Properties are associated (or correlated) with Corporate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Office Pro has no effect on the direction of Highwoods Properties i.e., Highwoods Properties and Corporate Office go up and down completely randomly.

Pair Corralation between Highwoods Properties and Corporate Office

Considering the 90-day investment horizon Highwoods Properties is expected to generate 1.27 times more return on investment than Corporate Office. However, Highwoods Properties is 1.27 times more volatile than Corporate Office Properties. It trades about 0.05 of its potential returns per unit of risk. Corporate Office Properties is currently generating about 0.04 per unit of risk. If you would invest  2,176  in Highwoods Properties on July 11, 2024 and sell it today you would earn a total of  1,057  from holding Highwoods Properties or generate 48.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	38.38%
Values	Daily Returns

Highwoods Properties  vs.  Corporate Office Properties

Highwoods Properties

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highwoods Properties are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward indicators, Highwoods Properties showed solid returns over the last few months and may actually be approaching a breakup point.

Corporate Office Pro

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Highwoods Properties and Corporate Office

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

The idea behind Highwoods Properties and Corporate Office 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.