Correlation Between Empire State and Meridian Small
Can any of the company-specific risk be diversified away by investing in both Empire State and Meridian Small 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 Meridian Small 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 Meridian Small Cap, you can compare the effects of market volatilities on Empire State and Meridian Small 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 Meridian Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Meridian Small.
Diversification Opportunities for Empire State and Meridian Small
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Empire and Meridian is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Meridian Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Small Cap 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 Meridian Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Small Cap has no effect on the direction of Empire State i.e., Empire State and Meridian Small go up and down completely randomly.
Pair Corralation between Empire State and Meridian Small
Given the investment horizon of 90 days Empire State Realty is expected to generate 1.77 times more return on investment than Meridian Small. However, Empire State is 1.77 times more volatile than Meridian Small Cap. It trades about 0.06 of its potential returns per unit of risk. Meridian Small Cap is currently generating about 0.03 per unit of risk. If you would invest 657.00 in Empire State Realty on August 30, 2024 and sell it today you would earn a total of 451.00 from holding Empire State Realty or generate 68.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire State Realty vs. Meridian Small Cap
Performance |
| Timeline |
| Empire State Realty |
| Meridian Small Cap |
Empire State and Meridian Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Meridian Small
The main advantage of trading using opposite Empire State and Meridian Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Meridian Small 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 Meridian Small will offset losses from the drop in Meridian Small's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| Meridian Small vs. Putnam Equity Income | Meridian Small vs. Putnam Growth Opportunities | Meridian Small vs. HUMANA INC | Meridian Small vs. Aquagold International |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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