Correlation Between Empire State and Energy
Can any of the company-specific risk be diversified away by investing in both Empire State and Energy 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 Energy 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 Energy and Water, you can compare the effects of market volatilities on Empire State and Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Energy.
Diversification Opportunities for Empire State and Energy
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Empire and Energy is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of Empire State i.e., Empire State and Energy go up and down completely randomly.
Pair Corralation between Empire State and Energy
Given the investment horizon of 90 days Empire State Realty is expected to under-perform the Energy. But the stock apears to be less risky and, when comparing its historical volatility, Empire State Realty is 9.71 times less risky than Energy. The stock trades about -0.13 of its potential returns per unit of risk. The Energy and Water is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 0.17 in Energy and Water on December 1, 2024 and sell it today you would earn a total of 0.15 from holding Energy and Water or generate 88.24% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Empire State Realty vs. Energy and Water
Performance |
Timeline |
Empire State Realty |
Energy and Water |
Empire State and Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Empire State and Energy
The main advantage of trading using opposite Empire State and Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Energy 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 Energy will offset losses from the drop in Energy's long position.Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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