Correlation Between Empire State and EDreams Odigeo

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

Diversification Opportunities for Empire State and EDreams Odigeo

-0.76

Correlation Coefficient

Empire State  EDreams Odigeo

Pay attention - limited upside

The 3 months correlation between Empire and EDreams is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and eDreams Odigeo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eDreams Odigeo SA 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 EDreams Odigeo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eDreams Odigeo SA has no effect on the direction of Empire State i.e., Empire State and EDreams Odigeo go up and down completely randomly.

Pair Corralation between Empire State and EDreams Odigeo

Given the investment horizon of 90 days Empire State Realty is expected to under-perform the EDreams Odigeo. In addition to that, Empire State is 1.04 times more volatile than eDreams Odigeo SA. It trades about -0.22 of its total potential returns per unit of risk. eDreams Odigeo SA is currently generating about 0.18 per unit of volatility. If you would invest  685.00  in eDreams Odigeo SA on November 28, 2024 and sell it today you would earn a total of  130.00  from holding eDreams Odigeo SA or generate 18.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

Empire State Realty  vs.  eDreams Odigeo SA

Empire State Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire State Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

eDreams Odigeo SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eDreams Odigeo SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, EDreams Odigeo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire State and EDreams Odigeo

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

The idea behind Empire State Realty and eDreams Odigeo SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.