Correlation Between Airports and Empire State

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

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

Diversification Opportunities for Airports and Empire State

0.91

Correlation Coefficient

Airports  Empire State

Almost no diversification

The 3 months correlation between Airports and Empire is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Empire State Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire State Realty and Airports 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 Airports of Thailand are associated (or correlated) with Empire State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire State Realty has no effect on the direction of Airports i.e., Airports and Empire State go up and down completely randomly.

Pair Corralation between Airports and Empire State

Assuming the 90 days horizon Airports of Thailand is expected to under-perform the Empire State. In addition to that, Airports is 3.41 times more volatile than Empire State Realty. It trades about -0.08 of its total potential returns per unit of risk. Empire State Realty is currently generating about -0.23 per unit of volatility. If you would invest  1,006  in Empire State Realty on December 30, 2024 and sell it today you would lose (223.00) from holding Empire State Realty or give up 22.17% of portfolio value over 90 days.

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

Airports of Thailand  vs.  Empire State Realty

Airports of Thailand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Airports of Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Empire State Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire State Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Airports and Empire State

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

The idea behind Airports of Thailand and Empire State 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.