Correlation Between Brandywine Realty and Piedmont Office

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

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

Diversification Opportunities for Brandywine Realty and Piedmont Office

0.88

Correlation Coefficient

Brandywine Realty  Piedmont Office

Very poor diversification

The 3 months correlation between Brandywine and Piedmont is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Brandywine Realty Trust and Piedmont Office Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Office Realty and Brandywine Realty 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 Brandywine Realty Trust are associated (or correlated) with Piedmont Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Office Realty has no effect on the direction of Brandywine Realty i.e., Brandywine Realty and Piedmont Office go up and down completely randomly.

Pair Corralation between Brandywine Realty and Piedmont Office

Considering the 90-day investment horizon Brandywine Realty is expected to generate 1.48 times less return on investment than Piedmont Office. In addition to that, Brandywine Realty is 1.02 times more volatile than Piedmont Office Realty. It trades about 0.1 of its total potential returns per unit of risk. Piedmont Office Realty is currently generating about 0.15 per unit of volatility. If you would invest  604.00  in Piedmont Office Realty on March 4, 2024 and sell it today you would earn a total of  125.00  from holding Piedmont Office Realty or generate 20.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Brandywine Realty Trust  vs.  Piedmont Office Realty

Brandywine Realty Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brandywine Realty Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Brandywine Realty displayed solid returns over the last few months and may actually be approaching a breakup point.

Piedmont Office Realty

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Piedmont Office Realty are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Piedmont Office displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brandywine Realty and Piedmont Office

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

The idea behind Brandywine Realty Trust and Piedmont Office Realty 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.