Correlation Between Empire State and Airports

Can any of the company-specific risk be diversified away by investing in both Empire State and Airports 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 Airports 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 Airports of Thailand, you can compare the effects of market volatilities on Empire State and Airports 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 Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Airports.

Diversification Opportunities for Empire State and Airports

0.01

Correlation Coefficient

Empire State  Airports

Significant diversification

The 3 months correlation between Empire and Airports is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand 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 Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Empire State i.e., Empire State and Airports go up and down completely randomly.

Pair Corralation between Empire State and Airports

Given the investment horizon of 90 days Empire State Realty is expected to generate 0.26 times more return on investment than Airports. However, Empire State Realty is 3.86 times less risky than Airports. It trades about 0.04 of its potential returns per unit of risk. Airports of Thailand is currently generating about 0.01 per unit of risk. If you would invest  1,066  in Empire State Realty on September 2, 2024 and sell it today you would earn a total of  30.00  from holding Empire State Realty or generate 2.81% return on investment over 90 days.

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

Empire State Realty  vs.  Airports of Thailand

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. In spite of comparatively stable basic indicators, Empire State is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Airports of Thailand

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Airports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Empire State and Airports

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

The idea behind Empire State Realty and Airports of Thailand 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.