Correlation Between Hudson Pacific and Equity Commonwealth

Can any of the company-specific risk be diversified away by investing in both Hudson Pacific and Equity Commonwealth 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 Equity Commonwealth 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 Equity Commonwealth, you can compare the effects of market volatilities on Hudson Pacific and Equity Commonwealth 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 Equity Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hudson Pacific and Equity Commonwealth.

Diversification Opportunities for Hudson Pacific and Equity Commonwealth

0.68

Correlation Coefficient

Hudson Pacific  Equity Commonwealth

Poor diversification

The 3 months correlation between Hudson and Equity is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth 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 Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of Hudson Pacific i.e., Hudson Pacific and Equity Commonwealth go up and down completely randomly.

Pair Corralation between Hudson Pacific and Equity Commonwealth

Assuming the 90 days trading horizon Hudson Pacific Properties is expected to generate 10.66 times more return on investment than Equity Commonwealth. However, Hudson Pacific is 10.66 times more volatile than Equity Commonwealth. It trades about 0.06 of its potential returns per unit of risk. Equity Commonwealth is currently generating about 0.12 per unit of risk. If you would invest  1,363  in Hudson Pacific Properties on September 4, 2024 and sell it today you would earn a total of  55.00  from holding Hudson Pacific Properties or generate 4.04% return on investment over 90 days.

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

Hudson Pacific Properties  vs.  Equity Commonwealth

Hudson Pacific Properties

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Pacific Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Hudson Pacific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Equity Commonwealth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Commonwealth are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Equity Commonwealth is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hudson Pacific and Equity Commonwealth

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

The idea behind Hudson Pacific Properties and Equity Commonwealth 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.