Correlation Between Empire State and RSL Electronics
Can any of the company-specific risk be diversified away by investing in both Empire State and RSL Electronics 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 RSL Electronics 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 RSL Electronics, you can compare the effects of market volatilities on Empire State and RSL Electronics 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 RSL Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and RSL Electronics.
Diversification Opportunities for Empire State and RSL Electronics
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Empire and RSL is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and RSL Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RSL Electronics 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 RSL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RSL Electronics has no effect on the direction of Empire State i.e., Empire State and RSL Electronics go up and down completely randomly.
Pair Corralation between Empire State and RSL Electronics
Given the investment horizon of 90 days Empire State is expected to generate 2.82 times less return on investment than RSL Electronics. But when comparing it to its historical volatility, Empire State Realty is 2.23 times less risky than RSL Electronics. It trades about 0.13 of its potential returns per unit of risk. RSL Electronics is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 70,150 in RSL Electronics on September 1, 2024 and sell it today you would earn a total of 5,670 from holding RSL Electronics or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 85.71% |
| Values | Daily Returns |
Empire State Realty vs. RSL Electronics
Performance |
| Timeline |
| Empire State Realty |
| RSL Electronics |
Empire State and RSL Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and RSL Electronics
The main advantage of trading using opposite Empire State and RSL Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, RSL Electronics 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 RSL Electronics will offset losses from the drop in RSL Electronics' long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| RSL Electronics vs. Arad | RSL Electronics vs. Alony Hetz Properties | RSL Electronics vs. Airport City | RSL Electronics vs. Harel Insurance Investments |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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