Correlation Between Empire State and SPDR SP

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

Diversification Opportunities for Empire State and SPDR SP

0.89

Correlation Coefficient

Empire State  SPDR SP

Very poor diversification

The 3 months correlation between Empire and SPDR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and SPDR SP Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Retail 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Retail has no effect on the direction of Empire State i.e., Empire State and SPDR SP go up and down completely randomly.

Pair Corralation between Empire State and SPDR SP

Given the investment horizon of 90 days Empire State Realty is expected to under-perform the SPDR SP. In addition to that, Empire State is 1.35 times more volatile than SPDR SP Retail. It trades about -0.21 of its total potential returns per unit of risk. SPDR SP Retail is currently generating about -0.15 per unit of volatility. If you would invest  7,935  in SPDR SP Retail on December 28, 2024 and sell it today you would lose (903.00) from holding SPDR SP Retail or give up 11.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Empire State Realty  vs.  SPDR SP Retail

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

SPDR SP Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Empire State and SPDR SP

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

The idea behind Empire State Realty and SPDR SP Retail 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.