Correlation Between Empire State and Office Properties
Can any of the company-specific risk be diversified away by investing in both Empire State and Office Properties 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 Office Properties 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 Office Properties Income, you can compare the effects of market volatilities on Empire State and Office Properties 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 Office Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Office Properties.
Diversification Opportunities for Empire State and Office Properties
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Empire and Office is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income 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 Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of Empire State i.e., Empire State and Office Properties go up and down completely randomly.
Pair Corralation between Empire State and Office Properties
Given the investment horizon of 90 days Empire State Realty is expected to generate 9.81 times more return on investment than Office Properties. However, Empire State is 9.81 times more volatile than Office Properties Income. It trades about 0.05 of its potential returns per unit of risk. Office Properties Income is currently generating about -0.04 per unit of risk. If you would invest 684.00 in Empire State Realty on August 31, 2024 and sell it today you would earn a total of 427.00 from holding Empire State Realty or generate 62.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.25% |
| Values | Daily Returns |
Empire State Realty vs. Office Properties Income
Performance |
| Timeline |
| Empire State Realty |
| Office Properties Income |
Empire State and Office Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Office Properties
The main advantage of trading using opposite Empire State and Office Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Office Properties 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 Office Properties will offset losses from the drop in Office Properties' long position.| Empire State vs. Empire State Realty | Empire State vs. City Office | Empire State vs. Cousins Properties Incorporated | Empire State vs. Postal Realty Trust |
| Office Properties vs. Hudson Pacific Properties | Office Properties vs. Piedmont Office Realty | Office Properties vs. City Office | Office Properties vs. Kilroy Realty Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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