Correlation Between Empire State and First Eagle
Can any of the company-specific risk be diversified away by investing in both Empire State and First Eagle 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 First Eagle 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 First Eagle Value, you can compare the effects of market volatilities on Empire State and First Eagle 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 First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and First Eagle.
Diversification Opportunities for Empire State and First Eagle
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Empire and FIRST is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and First Eagle Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Value 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 First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle Value has no effect on the direction of Empire State i.e., Empire State and First Eagle go up and down completely randomly.
Pair Corralation between Empire State and First Eagle
Given the investment horizon of 90 days Empire State Realty is expected to generate 2.7 times more return on investment than First Eagle. However, Empire State is 2.7 times more volatile than First Eagle Value. It trades about 0.05 of its potential returns per unit of risk. First Eagle Value is currently generating about 0.08 per unit of risk. If you would invest 855.00 in Empire State Realty on August 29, 2024 and sell it today you would earn a total of 253.00 from holding Empire State Realty or generate 29.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire State Realty vs. First Eagle Value
Performance |
| Timeline |
| Empire State Realty |
| First Eagle Value |
Empire State and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and First Eagle
The main advantage of trading using opposite Empire State and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, First Eagle 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 First Eagle will offset losses from the drop in First Eagle's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| First Eagle vs. Franklin Moderate Allocation | First Eagle vs. Pgim Conservative Retirement | First Eagle vs. Transamerica Cleartrack Retirement | First Eagle vs. Franklin Lifesmart Retirement |
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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