Correlation Between Slate Office and City Office

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

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

Diversification Opportunities for Slate Office and City Office

0.55

Correlation Coefficient

Slate Office  City Office

Very weak diversification

The 3 months correlation between Slate and City is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Slate Office REIT and City Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office REIT and Slate Office 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 Slate Office REIT are associated (or correlated) with City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office REIT has no effect on the direction of Slate Office i.e., Slate Office and City Office go up and down completely randomly.

Pair Corralation between Slate Office and City Office

Assuming the 90 days horizon Slate Office REIT is expected to generate 1.76 times more return on investment than City Office. However, Slate Office is 1.76 times more volatile than City Office REIT. It trades about 0.07 of its potential returns per unit of risk. City Office REIT is currently generating about -0.04 per unit of risk. If you would invest  34.00  in Slate Office REIT on March 3, 2025 and sell it today you would earn a total of  4.00  from holding Slate Office REIT or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Slate Office REIT  vs.  City Office REIT

Slate Office REIT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Slate Office REIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Slate Office reported solid returns over the last few months and may actually be approaching a breakup point.

City Office REIT

Risk-Adjusted Performance

Weak

Over the last 90 days City Office REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, City Office is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Slate Office and City Office

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

The idea behind Slate Office REIT and City Office REIT 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 Commodity Directory module to find actively traded commodities issued by global exchanges.