Correlation Between Douglas Emmett and Empire State
Can any of the company-specific risk be diversified away by investing in both Douglas Emmett 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 Douglas Emmett and Empire State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Douglas Emmett and Empire State Realty, you can compare the effects of market volatilities on Douglas Emmett 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 Douglas Emmett with a short position of Empire State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and Empire State.
Diversification Opportunities for Douglas Emmett and Empire State
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Douglas and Empire is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett 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 Douglas Emmett 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 Douglas Emmett 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 Douglas Emmett i.e., Douglas Emmett and Empire State go up and down completely randomly.
Pair Corralation between Douglas Emmett and Empire State
Considering the 90-day investment horizon Douglas Emmett is expected to generate 1.68 times more return on investment than Empire State. However, Douglas Emmett is 1.68 times more volatile than Empire State Realty. It trades about -0.01 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 1,766 in Douglas Emmett on October 20, 2024 and sell it today you would lose (16.00) from holding Douglas Emmett or give up 0.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Douglas Emmett vs. Empire State Realty
Performance |
| Timeline |
| Douglas Emmett |
| Empire State Realty |
Douglas Emmett and Empire State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Douglas Emmett and Empire State
The main advantage of trading using opposite Douglas Emmett and Empire State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett 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.| Douglas Emmett vs. Brandywine Realty Trust | Douglas Emmett vs. Kilroy Realty Corp | Douglas Emmett vs. Piedmont Office Realty | Douglas Emmett vs. City Office |
| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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