Correlation Between Empire State and New Destiny

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Can any of the company-specific risk be diversified away by investing in both Empire State and New Destiny 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 New Destiny 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 New Destiny Mining, you can compare the effects of market volatilities on Empire State and New Destiny 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 New Destiny. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and New Destiny.

Diversification Opportunities for Empire State and New Destiny

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Empire and New is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and New Destiny Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Destiny Mining 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 New Destiny. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Destiny Mining has no effect on the direction of Empire State i.e., Empire State and New Destiny go up and down completely randomly.

Pair Corralation between Empire State and New Destiny

Given the investment horizon of 90 days Empire State Realty is expected to generate 0.14 times more return on investment than New Destiny. However, Empire State Realty is 6.91 times less risky than New Destiny. It trades about 0.09 of its potential returns per unit of risk. New Destiny Mining is currently generating about -0.01 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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Empire State Realty  vs.  New Destiny Mining

 Performance 
       Timeline  
Empire State Realty 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empire State is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
New Destiny Mining 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days New Destiny Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Empire State and New Destiny Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Empire State and New Destiny

The main advantage of trading using opposite Empire State and New Destiny positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, New Destiny 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 New Destiny will offset losses from the drop in New Destiny's long position.
The idea behind Empire State Realty and New Destiny Mining pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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