Correlation Between City Office and Alexandria Real

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

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

Diversification Opportunities for City Office and Alexandria Real

0.33

Correlation Coefficient

City Office  Alexandria Real

Weak diversification

The 3 months correlation between City and Alexandria is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding City Office REIT and Alexandria Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexandria Real Estate and City 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 City Office REIT are associated (or correlated) with Alexandria Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexandria Real Estate has no effect on the direction of City Office i.e., City Office and Alexandria Real go up and down completely randomly.

Pair Corralation between City Office and Alexandria Real

Assuming the 90 days trading horizon City Office REIT is expected to generate 0.85 times more return on investment than Alexandria Real. However, City Office REIT is 1.18 times less risky than Alexandria Real. It trades about 0.11 of its potential returns per unit of risk. Alexandria Real Estate is currently generating about 0.06 per unit of risk. If you would invest  1,652  in City Office REIT on February 19, 2024 and sell it today you would earn a total of  158.00  from holding City Office REIT or generate 9.56% return on investment over 90 days.

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

City Office REIT  vs.  Alexandria Real Estate

City Office REIT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in City Office REIT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, City Office may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Alexandria Real Estate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alexandria Real Estate are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Alexandria Real is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with City Office and Alexandria Real

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

The idea behind City Office REIT and Alexandria Real Estate 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.