Correlation Between Empire State and The Arbitrage
Can any of the company-specific risk be diversified away by investing in both Empire State and The Arbitrage 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 The Arbitrage 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 The Arbitrage Fund, you can compare the effects of market volatilities on Empire State and The Arbitrage 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 The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and The Arbitrage.
Diversification Opportunities for Empire State and The Arbitrage
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Empire and The is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Arbitrage 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 The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Arbitrage has no effect on the direction of Empire State i.e., Empire State and The Arbitrage go up and down completely randomly.
Pair Corralation between Empire State and The Arbitrage
Given the investment horizon of 90 days Empire State Realty is expected to generate 5.87 times more return on investment than The Arbitrage. However, Empire State is 5.87 times more volatile than The Arbitrage Fund. It trades about 0.08 of its potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.02 per unit of risk. If you would invest 1,062 in Empire State Realty on August 29, 2024 and sell it today you would earn a total of 63.00 from holding Empire State Realty or generate 5.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Empire State Realty vs. The Arbitrage Fund
Performance |
| Timeline |
| Empire State Realty |
| The Arbitrage |
Empire State and The Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and The Arbitrage
The main advantage of trading using opposite Empire State and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, The Arbitrage 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 The Arbitrage will offset losses from the drop in The Arbitrage's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| The Arbitrage vs. Fidelity Advisor Financial | The Arbitrage vs. Mesirow Financial Small | The Arbitrage vs. Icon Financial Fund | The Arbitrage vs. Hennessy Large Cap |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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