Correlation Between Empire State and Cloud

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

Diversification Opportunities for Empire State and Cloud

0.3

Correlation Coefficient

Empire State  Cloud

Weak diversification

The 3 months correlation between Empire and Cloud is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloud 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 Cloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloud has no effect on the direction of Empire State i.e., Empire State and Cloud go up and down completely randomly.

Pair Corralation between Empire State and Cloud

Given the investment horizon of 90 days Empire State is expected to generate 285.49 times less return on investment than Cloud. But when comparing it to its historical volatility, Empire State Realty is 94.06 times less risky than Cloud. It trades about 0.04 of its potential returns per unit of risk. Cloud is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Cloud on August 30, 2024 and sell it today you would earn a total of  48.00  from holding Cloud or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Empire State Realty  vs.  Cloud

Empire State Realty

Risk-Adjusted Performance

3 of 100

Modest

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.

Cloud

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cloud are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Cloud exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire State and Cloud

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

The idea behind Empire State Realty and Cloud 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.