Correlation Between Empire State and Codexis

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

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

Diversification Opportunities for Empire State and Codexis

-0.28

Correlation Coefficient

Empire State  Codexis

Very good diversification

The 3 months correlation between Empire and Codexis is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis and Empire State 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 State Realty are associated (or correlated) with Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of Empire State i.e., Empire State and Codexis go up and down completely randomly.

Pair Corralation between Empire State and Codexis

Given the investment horizon of 90 days Empire State Realty is expected to under-perform the Codexis. But the stock apears to be less risky and, when comparing its historical volatility, Empire State Realty is 2.02 times less risky than Codexis. The stock trades about -0.07 of its potential returns per unit of risk. The Codexis is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  330.00  in Codexis on October 22, 2024 and sell it today you would earn a total of  170.00  from holding Codexis or generate 51.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Empire State Realty  vs.  Codexis

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. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Codexis

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire State and Codexis

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

The idea behind Empire State Realty and Codexis 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.