Correlation Between Empire State and London Security
Can any of the company-specific risk be diversified away by investing in both Empire State and London Security 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 London Security 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 London Security Plc, you can compare the effects of market volatilities on Empire State and London Security 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 London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and London Security.
Diversification Opportunities for Empire State and London Security
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Empire and London is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Empire State i.e., Empire State and London Security go up and down completely randomly.
Pair Corralation between Empire State and London Security
Given the investment horizon of 90 days Empire State Realty is expected to generate 1.12 times more return on investment than London Security. However, Empire State is 1.12 times more volatile than London Security Plc. It trades about 0.09 of its potential returns per unit of risk. London Security Plc is currently generating about 0.06 per unit of risk. If you would invest 945.00 in Empire State Realty on September 1, 2024 and sell it today you would earn a total of 151.00 from holding Empire State Realty or generate 15.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.92% |
| Values | Daily Returns |
Empire State Realty vs. London Security Plc
Performance |
| Timeline |
| Empire State Realty |
| London Security Plc |
Empire State and London Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and London Security
The main advantage of trading using opposite Empire State and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| London Security vs. Samsung Electronics Co | London Security vs. Samsung Electronics Co | London Security vs. Hyundai Motor | London Security vs. Toyota Motor 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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