Correlation Between Empire State and MONA
Can any of the company-specific risk be diversified away by investing in both Empire State and MONA 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 MONA 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 MONA, you can compare the effects of market volatilities on Empire State and MONA 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 MONA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and MONA.
Diversification Opportunities for Empire State and MONA
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Empire and MONA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and MONA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MONA 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 MONA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MONA has no effect on the direction of Empire State i.e., Empire State and MONA go up and down completely randomly.
Pair Corralation between Empire State and MONA
Given the investment horizon of 90 days Empire State Realty is expected to under-perform the MONA. But the stock apears to be less risky and, when comparing its historical volatility, Empire State Realty is 2.87 times less risky than MONA. The stock trades about -0.31 of its potential returns per unit of risk. The MONA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 26.00 in MONA on November 27, 2024 and sell it today you would lose (2.00) from holding MONA or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Empire State Realty vs. MONA
Performance |
| Timeline |
| Empire State Realty |
| MONA |
Empire State and MONA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and MONA
The main advantage of trading using opposite Empire State and MONA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, MONA 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 MONA will offset losses from the drop in MONA's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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