Correlation Between Alexandria Real and Empire State

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

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

Diversification Opportunities for Alexandria Real and Empire State

0.17

Correlation Coefficient

Alexandria Real  Empire State

Average diversification

The 3 months correlation between Alexandria and Empire is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate 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 Alexandria Real 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 Alexandria Real Estate 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 Alexandria Real i.e., Alexandria Real and Empire State go up and down completely randomly.

Pair Corralation between Alexandria Real and Empire State

Considering the 90-day investment horizon Alexandria Real Estate is expected to under-perform the Empire State. But the stock apears to be less risky and, when comparing its historical volatility, Alexandria Real Estate is 1.1 times less risky than Empire State. The stock trades about -0.08 of its potential returns per unit of risk. The Empire State Realty is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Empire State Realty on September 16, 2024 and sell it today you would lose (18.00) from holding Empire State Realty or give up 1.64% of portfolio value over 90 days.

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

Alexandria Real Estate  vs.  Empire State Realty

Alexandria Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alexandria Real Estate 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Empire State Realty

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Empire State may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alexandria Real and Empire State

The main advantage of trading using opposite Alexandria Real and Empire State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alexandria Real 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 Alexandria Real Estate 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.