Correlation Between Empire State and Prime Energy
Can any of the company-specific risk be diversified away by investing in both Empire State and Prime Energy 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 Prime Energy 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 Prime Energy PE, you can compare the effects of market volatilities on Empire State and Prime Energy 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 Prime Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Prime Energy.
Diversification Opportunities for Empire State and Prime Energy
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Empire and Prime is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Prime Energy PE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Energy PE 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 Prime Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Energy PE has no effect on the direction of Empire State i.e., Empire State and Prime Energy go up and down completely randomly.
Pair Corralation between Empire State and Prime Energy
Given the investment horizon of 90 days Empire State is expected to generate 8.74 times less return on investment than Prime Energy. But when comparing it to its historical volatility, Empire State Realty is 3.98 times less risky than Prime Energy. It trades about 0.09 of its potential returns per unit of risk. Prime Energy PE is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 25,880 in Prime Energy PE on August 29, 2024 and sell it today you would earn a total of 41,910 from holding Prime Energy PE or generate 161.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 74.6% |
| Values | Daily Returns |
Empire State Realty vs. Prime Energy PE
Performance |
| Timeline |
| Empire State Realty |
| Prime Energy PE |
Empire State and Prime Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Prime Energy
The main advantage of trading using opposite Empire State and Prime Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Prime Energy 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 Prime Energy will offset losses from the drop in Prime Energy's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| Prime Energy vs. Ram On Investments and | Prime Energy vs. Analyst IMS Investment | Prime Energy vs. Harel Insurance Investments | Prime Energy vs. Sure Tech Investments LP |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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