Correlation Between Empire State and State Street
Can any of the company-specific risk be diversified away by investing in both Empire State and State Street 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 State Street 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 State Street Institutional, you can compare the effects of market volatilities on Empire State and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and State Street.
Diversification Opportunities for Empire State and State Street
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Empire and State is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and State Street Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Institu 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Institu has no effect on the direction of Empire State i.e., Empire State and State Street go up and down completely randomly.
Pair Corralation between Empire State and State Street
Given the investment horizon of 90 days Empire State is expected to generate 2.12 times less return on investment than State Street. But when comparing it to its historical volatility, Empire State Realty is 1.22 times less risky than State Street. It trades about 0.15 of its potential returns per unit of risk. State Street Institutional is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,889 in State Street Institutional on August 29, 2024 and sell it today you would earn a total of 165.00 from holding State Street Institutional or generate 8.73% 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. State Street Institutional
Performance |
| Timeline |
| Empire State Realty |
| State Street Institu |
Empire State and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and State Street
The main advantage of trading using opposite Empire State and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| State Street vs. Vanguard Small Cap Index | State Street vs. T Rowe Price | State Street vs. HUMANA INC | State Street vs. Aquagold International |
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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