Correlation Between Empire State and First Trust
Can any of the company-specific risk be diversified away by investing in both Empire State and First Trust 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 First Trust 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 First Trust Indxx, you can compare the effects of market volatilities on Empire State and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and First Trust.
Diversification Opportunities for Empire State and First Trust
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Empire and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Indxx has no effect on the direction of Empire State i.e., Empire State and First Trust go up and down completely randomly.
Pair Corralation between Empire State and First Trust
Given the investment horizon of 90 days Empire State Realty is expected to generate 2.01 times more return on investment than First Trust. However, Empire State is 2.01 times more volatile than First Trust Indxx. It trades about 0.05 of its potential returns per unit of risk. First Trust Indxx is currently generating about 0.08 per unit of risk. If you would invest 956.00 in Empire State Realty on September 1, 2024 and sell it today you would earn a total of 140.00 from holding Empire State Realty or generate 14.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire State Realty vs. First Trust Indxx
Performance |
| Timeline |
| Empire State Realty |
| First Trust Indxx |
Empire State and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and First Trust
The main advantage of trading using opposite Empire State and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx | First Trust vs. First Trust NASDAQ |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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