Correlation Between Safehold and Empire State

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

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

Diversification Opportunities for Safehold and Empire State

-0.32

Correlation Coefficient

Safehold  Empire State

Very good diversification

The 3 months correlation between Safehold and Empire is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Safehold 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 Safehold 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 Safehold 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 Safehold i.e., Safehold and Empire State go up and down completely randomly.

Pair Corralation between Safehold and Empire State

Given the investment horizon of 90 days Safehold is expected to generate 1.41 times more return on investment than Empire State. However, Safehold is 1.41 times more volatile than Empire State Realty. It trades about 0.0 of its potential returns per unit of risk. Empire State Realty is currently generating about -0.23 per unit of risk. If you would invest  1,834  in Safehold on December 29, 2024 and sell it today you would lose (24.00) from holding Safehold or give up 1.31% of portfolio value over 90 days.

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

Safehold  vs.  Empire State Realty

Safehold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Safehold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Safehold is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 unsteady 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.

Pair Trading with Safehold and Empire State

The main advantage of trading using opposite Safehold and Empire State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safehold 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 Safehold 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.