Correlation Between Vornado Realty and Empire State

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

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

Diversification Opportunities for Vornado Realty and Empire State

0.45

Correlation Coefficient

Vornado Realty  Empire State

Very weak diversification

The 3 months correlation between Vornado and Empire is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vornado Realty Trust 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 Vornado Realty 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 Vornado Realty Trust 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 Vornado Realty i.e., Vornado Realty and Empire State go up and down completely randomly.

Pair Corralation between Vornado Realty and Empire State

Assuming the 90 days trading horizon Vornado Realty is expected to generate 11.42 times less return on investment than Empire State. But when comparing it to its historical volatility, Vornado Realty Trust is 1.81 times less risky than Empire State. It trades about 0.01 of its potential returns per unit of risk. Empire State Realty is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,016  in Empire State Realty on September 12, 2024 and sell it today you would earn a total of  81.00  from holding Empire State Realty or generate 7.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Vornado Realty Trust  vs.  Empire State Realty

Vornado Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vornado Realty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Empire State Realty

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Empire State may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vornado Realty and Empire State

The main advantage of trading using opposite Vornado Realty and Empire State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vornado Realty 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 Vornado Realty Trust 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.