Correlation Between Empire State and Brandywine Realty

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

Diversification Opportunities for Empire State and Brandywine Realty

0.83

Correlation Coefficient

Empire State  Brandywine Realty

Very poor diversification

The 3 months correlation between Empire and Brandywine is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Brandywine Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandywine Realty Trust 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 Brandywine Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandywine Realty Trust has no effect on the direction of Empire State i.e., Empire State and Brandywine Realty go up and down completely randomly.

Pair Corralation between Empire State and Brandywine Realty

Given the investment horizon of 90 days Empire State Realty is expected to under-perform the Brandywine Realty. In addition to that, Empire State is 1.48 times more volatile than Brandywine Realty Trust. It trades about -0.13 of its total potential returns per unit of risk. Brandywine Realty Trust is currently generating about -0.13 per unit of volatility. If you would invest  536.00  in Brandywine Realty Trust on December 27, 2024 and sell it today you would lose (81.00) from holding Brandywine Realty Trust or give up 15.11% 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.  Brandywine Realty Trust

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. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Brandywine Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brandywine Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Empire State and Brandywine Realty

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

The idea behind Empire State Realty and Brandywine Realty Trust 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.