Correlation Between Empire State and SOCO
Can any of the company-specific risk be diversified away by investing in both Empire State and SOCO 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 SOCO 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 SOCO Corporation, you can compare the effects of market volatilities on Empire State and SOCO 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 SOCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and SOCO.
Diversification Opportunities for Empire State and SOCO
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Empire and SOCO is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and SOCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOCO 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 SOCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOCO has no effect on the direction of Empire State i.e., Empire State and SOCO go up and down completely randomly.
Pair Corralation between Empire State and SOCO
Given the investment horizon of 90 days Empire State is expected to generate 2.64 times less return on investment than SOCO. But when comparing it to its historical volatility, Empire State Realty is 3.88 times less risky than SOCO. It trades about 0.09 of its potential returns per unit of risk. SOCO Corporation is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9.50 in SOCO Corporation on September 1, 2024 and sell it today you would earn a total of 2.50 from holding SOCO Corporation or generate 26.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.92% |
| Values | Daily Returns |
Empire State Realty vs. SOCO Corp.
Performance |
| Timeline |
| Empire State Realty |
| SOCO |
Empire State and SOCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and SOCO
The main advantage of trading using opposite Empire State and SOCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, SOCO 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 SOCO will offset losses from the drop in SOCO's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| SOCO vs. Richmond Vanadium Technology | SOCO vs. Hawsons Iron | SOCO vs. Medical Developments International | SOCO vs. EMvision Medical Devices |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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