Correlation Between Western Asset and Empire State

Can any of the company-specific risk be diversified away by investing in both Western Asset and Empire State 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 Western Asset and Empire State into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Asset Investment and Empire State Realty, you can compare the effects of market volatilities on Western Asset and Empire State 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 Western Asset with a short position of Empire State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Empire State.

Diversification Opportunities for Western Asset and Empire State

-0.33

Correlation Coefficient

Western Asset  Empire State

Very good diversification

The 3 months correlation between Western and Empire is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Empire State Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire State Realty and Western Asset 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 Western Asset Investment are associated (or correlated) with Empire State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire State Realty has no effect on the direction of Western Asset i.e., Western Asset and Empire State go up and down completely randomly.

Pair Corralation between Western Asset and Empire State

Considering the 90-day investment horizon Western Asset Investment is expected to generate 0.16 times more return on investment than Empire State. However, Western Asset Investment is 6.44 times less risky than Empire State. It trades about 0.09 of its potential returns per unit of risk. Empire State Realty is currently generating about -0.15 per unit of risk. If you would invest  1,630  in Western Asset Investment on December 21, 2024 and sell it today you would earn a total of  33.00  from holding Western Asset Investment or generate 2.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

Western Asset Investment  vs.  Empire State Realty

Western Asset Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Western Asset is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Western Asset and Empire State

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

The idea behind Western Asset Investment and Empire State Realty 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.