Correlation Between Hudson Pacific and Paramount

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

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

Diversification Opportunities for Hudson Pacific and Paramount

0.7

Correlation Coefficient

Hudson Pacific  Paramount

Poor diversification

The 3 months correlation between Hudson and Paramount is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties and Paramount Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Group and Hudson Pacific 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 Hudson Pacific Properties 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 Hudson Pacific i.e., Hudson Pacific and Paramount go up and down completely randomly.

Pair Corralation between Hudson Pacific and Paramount

Considering the 90-day investment horizon Hudson Pacific Properties is expected to under-perform the Paramount. In addition to that, Hudson Pacific is 1.51 times more volatile than Paramount Group. It trades about -0.01 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  580.00  in Paramount Group on June 23, 2024 and sell it today you would lose (78.00) from holding Paramount Group or give up 13.45% of portfolio value over 90 days.

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

Hudson Pacific Properties  vs.  Paramount Group

Hudson Pacific Properties

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Pacific Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hudson Pacific may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Paramount Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Paramount may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Hudson Pacific and Paramount

The main advantage of trading using opposite Hudson Pacific and Paramount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Pacific 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 Hudson Pacific Properties 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.