Correlation Between Boston Properties and RedFlow

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

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

Diversification Opportunities for Boston Properties and RedFlow

-0.61

Correlation Coefficient

Boston Properties  RedFlow

Excellent diversification

The 3 months correlation between Boston and RedFlow is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and RedFlow Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RedFlow Limited and Boston Properties 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 Boston Properties are associated (or correlated) with RedFlow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RedFlow Limited has no effect on the direction of Boston Properties i.e., Boston Properties and RedFlow go up and down completely randomly.

Pair Corralation between Boston Properties and RedFlow

Considering the 90-day investment horizon Boston Properties is expected to generate 73.08 times less return on investment than RedFlow. But when comparing it to its historical volatility, Boston Properties is 35.73 times less risky than RedFlow. It trades about 0.05 of its potential returns per unit of risk. RedFlow Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  14.00  in RedFlow Limited on February 3, 2025 and sell it today you would lose (13.90) from holding RedFlow Limited or give up 99.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Boston Properties  vs.  RedFlow Limited

Boston Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

RedFlow Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RedFlow Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, RedFlow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Properties and RedFlow

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

The idea behind Boston Properties and RedFlow Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.