Correlation Between Empire Global and Freehold Royalties

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

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

Diversification Opportunities for Empire Global and Freehold Royalties

0.4

Correlation Coefficient

Empire Global  Freehold Royalties

Very weak diversification

The 3 months correlation between Empire and Freehold is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Empire Global Gaming and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties and Empire Global 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 Empire Global Gaming are associated (or correlated) with Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Empire Global i.e., Empire Global and Freehold Royalties go up and down completely randomly.

Pair Corralation between Empire Global and Freehold Royalties

Given the investment horizon of 90 days Empire Global Gaming is expected to generate 211.7 times more return on investment than Freehold Royalties. However, Empire Global is 211.7 times more volatile than Freehold Royalties. It trades about 0.28 of its potential returns per unit of risk. Freehold Royalties is currently generating about 0.03 per unit of risk. If you would invest  0.00  in Empire Global Gaming on December 29, 2024 and sell it today you would earn a total of  0.01  from holding Empire Global Gaming or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	21.31%
Values	Daily Returns

Empire Global Gaming  vs.  Freehold Royalties

Empire Global Gaming

Risk-Adjusted Performance

Solid

Over the last 90 days Empire Global Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating technical and fundamental indicators, Empire Global reported solid returns over the last few months and may actually be approaching a breakup point.

Freehold Royalties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Freehold Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Empire Global and Freehold Royalties

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

The idea behind Empire Global Gaming and Freehold Royalties 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.