Correlation Between Empire State and Small Cap
Can any of the company-specific risk be diversified away by investing in both Empire State and Small Cap 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 Small Cap 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 Small Cap Growth, you can compare the effects of market volatilities on Empire State and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Small Cap.
Diversification Opportunities for Empire State and Small Cap
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Empire and Small is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Empire State i.e., Empire State and Small Cap go up and down completely randomly.
Pair Corralation between Empire State and Small Cap
Given the investment horizon of 90 days Empire State is expected to generate 2.55 times less return on investment than Small Cap. But when comparing it to its historical volatility, Empire State Realty is 1.1 times less risky than Small Cap. It trades about 0.11 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,586 in Small Cap Growth on August 30, 2024 and sell it today you would earn a total of 127.00 from holding Small Cap Growth or generate 8.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire State Realty vs. Small Cap Growth
Performance |
| Timeline |
| Empire State Realty |
| Small Cap Growth |
Empire State and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Small Cap
The main advantage of trading using opposite Empire State and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| Small Cap vs. Dreyfus Technology Growth | Small Cap vs. Goldman Sachs Technology | Small Cap vs. Fidelity Advisor Technology | Small Cap vs. Technology Ultrasector Profund |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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