Correlation Between Empire State and American Century
Can any of the company-specific risk be diversified away by investing in both Empire State and American Century 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 American Century 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 American Century Quality, you can compare the effects of market volatilities on Empire State and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and American Century.
Diversification Opportunities for Empire State and American Century
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Empire and American is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and American Century Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Quality 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Quality has no effect on the direction of Empire State i.e., Empire State and American Century go up and down completely randomly.
Pair Corralation between Empire State and American Century
Given the investment horizon of 90 days Empire State Realty is expected to generate 3.36 times more return on investment than American Century. However, Empire State is 3.36 times more volatile than American Century Quality. It trades about 0.09 of its potential returns per unit of risk. American Century Quality is currently generating about 0.24 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Empire State Realty vs. American Century Quality
Performance |
| Timeline |
| Empire State Realty |
| American Century Quality |
Empire State and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and American Century
The main advantage of trading using opposite Empire State and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| American Century vs. American Century ETF | American Century vs. American Century Quality | American Century vs. Rareview Dynamic Fixed | American Century vs. First Trust Exchange |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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