Correlation Between Empire State and Niagara Mohawk
Can any of the company-specific risk be diversified away by investing in both Empire State and Niagara Mohawk 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 Niagara Mohawk 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 Niagara Mohawk Power, you can compare the effects of market volatilities on Empire State and Niagara Mohawk 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 Niagara Mohawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Niagara Mohawk.
Diversification Opportunities for Empire State and Niagara Mohawk
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Empire and Niagara is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Empire State i.e., Empire State and Niagara Mohawk go up and down completely randomly.
Pair Corralation between Empire State and Niagara Mohawk
Given the investment horizon of 90 days Empire State Realty is expected to generate 2.0 times more return on investment than Niagara Mohawk. However, Empire State is 2.0 times more volatile than Niagara Mohawk Power. It trades about 0.13 of its potential returns per unit of risk. Niagara Mohawk Power is currently generating about -0.24 per unit of risk. If you would invest 1,060 in Empire State Realty on September 1, 2024 and sell it today you would earn a total of 36.00 from holding Empire State Realty or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire State Realty vs. Niagara Mohawk Power
Performance |
| Timeline |
| Empire State Realty |
| Niagara Mohawk Power |
Empire State and Niagara Mohawk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Niagara Mohawk
The main advantage of trading using opposite Empire State and Niagara Mohawk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Niagara Mohawk 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 Niagara Mohawk will offset losses from the drop in Niagara Mohawk's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| Niagara Mohawk vs. Asure Software | Niagara Mohawk vs. Skechers USA | Niagara Mohawk vs. Under Armour C | Niagara Mohawk vs. Western Digital |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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