Correlation Between EastGroup Properties and Empire State

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

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

Diversification Opportunities for EastGroup Properties and Empire State

0.82

Correlation Coefficient

EastGroup Properties  Empire State

Very poor diversification

The 3 months correlation between EastGroup and Empire is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding EastGroup Properties 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 EastGroup 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 EastGroup Properties 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 EastGroup Properties i.e., EastGroup Properties and Empire State go up and down completely randomly.

Pair Corralation between EastGroup Properties and Empire State

Considering the 90-day investment horizon EastGroup Properties is expected to generate 1.18 times more return on investment than Empire State. However, EastGroup Properties is 1.18 times more volatile than Empire State Realty. It trades about 0.2 of its potential returns per unit of risk. Empire State Realty is currently generating about -0.02 per unit of risk. If you would invest  15,968  in EastGroup Properties on October 23, 2024 and sell it today you would earn a total of  1,012  from holding EastGroup Properties or generate 6.34% return on investment over 90 days.

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

EastGroup Properties  vs.  Empire State Realty

EastGroup Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EastGroup Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, EastGroup Properties is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Empire State Realty

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EastGroup Properties and Empire State

The main advantage of trading using opposite EastGroup Properties and Empire State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EastGroup Properties 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 EastGroup Properties 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.