Correlation Between Empire State and National Atomic

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

Diversification Opportunities for Empire State and National Atomic

0.22

Correlation Coefficient

Empire State  National Atomic

Modest diversification

The 3 months correlation between Empire and National is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and National Atomic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Atomic 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 National Atomic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Atomic has no effect on the direction of Empire State i.e., Empire State and National Atomic go up and down completely randomly.

Pair Corralation between Empire State and National Atomic

Given the investment horizon of 90 days Empire State is expected to generate 2.99 times less return on investment than National Atomic. But when comparing it to its historical volatility, Empire State Realty is 1.46 times less risky than National Atomic. It trades about 0.04 of its potential returns per unit of risk. National Atomic Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,695  in National Atomic Co on September 2, 2024 and sell it today you would earn a total of  350.00  from holding National Atomic Co or generate 9.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Empire State Realty  vs.  National Atomic Co

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.

National Atomic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Atomic Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, National Atomic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Empire State and National Atomic

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

The idea behind Empire State Realty and National Atomic Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.