Correlation Between Empire State and EXP

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

Diversification Opportunities for Empire State and EXP

-0.09

Correlation Coefficient

Empire State  EXP

Good diversification

The 3 months correlation between Empire and EXP is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and EXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXP 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 EXP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXP has no effect on the direction of Empire State i.e., Empire State and EXP go up and down completely randomly.

Pair Corralation between Empire State and EXP

Given the investment horizon of 90 days Empire State is expected to generate 278.16 times less return on investment than EXP. But when comparing it to its historical volatility, Empire State Realty is 95.75 times less risky than EXP. It trades about 0.04 of its potential returns per unit of risk. EXP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.04  in EXP on August 30, 2024 and sell it today you would lose  0.00  from holding EXP or give up 6.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Empire State Realty  vs.  EXP

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.

EXP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EXP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, EXP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire State and EXP

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

The idea behind Empire State Realty and EXP 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.