Correlation Between Empire State and Allied Energy
Can any of the company-specific risk be diversified away by investing in both Empire State and Allied Energy 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 Allied Energy 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 Allied Energy, you can compare the effects of market volatilities on Empire State and Allied Energy 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 Allied Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Allied Energy.
Diversification Opportunities for Empire State and Allied Energy
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Empire and Allied is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Allied Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Energy 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 Allied Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Energy has no effect on the direction of Empire State i.e., Empire State and Allied Energy go up and down completely randomly.
Pair Corralation between Empire State and Allied Energy
Given the investment horizon of 90 days Empire State is expected to generate 10.59 times less return on investment than Allied Energy. But when comparing it to its historical volatility, Empire State Realty is 11.96 times less risky than Allied Energy. It trades about 0.13 of its potential returns per unit of risk. Allied Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1.10 in Allied Energy on September 1, 2024 and sell it today you would earn a total of 0.19 from holding Allied Energy or generate 17.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Empire State Realty vs. Allied Energy
Performance |
| Timeline |
| Empire State Realty |
| Allied Energy |
Empire State and Allied Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Allied Energy
The main advantage of trading using opposite Empire State and Allied Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Allied Energy 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 Allied Energy will offset losses from the drop in Allied Energy's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| Allied Energy vs. American Leisure Holdings | Allied Energy vs. Supurva Healthcare Group | Allied Energy vs. China Health Management | Allied Energy vs. Embrace Change Acquisition |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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