Correlation Between JBG SMITH and Douglas Emmett

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

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

Diversification Opportunities for JBG SMITH and Douglas Emmett

0.05

Correlation Coefficient

JBG SMITH  Douglas Emmett

Significant diversification

The 3 months correlation between JBG and Douglas is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding JBG SMITH Properties and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett and JBG SMITH 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 JBG SMITH Properties are associated (or correlated) with Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of JBG SMITH i.e., JBG SMITH and Douglas Emmett go up and down completely randomly.

Pair Corralation between JBG SMITH and Douglas Emmett

Given the investment horizon of 90 days JBG SMITH Properties is expected to under-perform the Douglas Emmett. But the stock apears to be less risky and, when comparing its historical volatility, JBG SMITH Properties is 1.18 times less risky than Douglas Emmett. The stock trades about -0.06 of its potential returns per unit of risk. The Douglas Emmett is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,312  in Douglas Emmett on February 5, 2024 and sell it today you would earn a total of  73.00  from holding Douglas Emmett or generate 5.56% return on investment over 90 days.

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

JBG SMITH Properties  vs.  Douglas Emmett

JBG SMITH Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBG SMITH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, JBG SMITH is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Douglas Emmett

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Emmett are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Douglas Emmett may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with JBG SMITH and Douglas Emmett

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

The idea behind JBG SMITH Properties and Douglas Emmett 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.