Correlation Between Empire State and Stemsation International
Can any of the company-specific risk be diversified away by investing in both Empire State and Stemsation International 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 Stemsation International 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 Stemsation International, you can compare the effects of market volatilities on Empire State and Stemsation International 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 Stemsation International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Stemsation International.
Diversification Opportunities for Empire State and Stemsation International
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Empire and Stemsation is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Stemsation International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stemsation International 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 Stemsation International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stemsation International has no effect on the direction of Empire State i.e., Empire State and Stemsation International go up and down completely randomly.
Pair Corralation between Empire State and Stemsation International
Given the investment horizon of 90 days Empire State is expected to generate 16.52 times less return on investment than Stemsation International. But when comparing it to its historical volatility, Empire State Realty is 9.38 times less risky than Stemsation International. It trades about 0.04 of its potential returns per unit of risk. Stemsation International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.10 in Stemsation International on November 27, 2024 and sell it today you would lose (0.53) from holding Stemsation International or give up 48.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire State Realty vs. Stemsation International
Performance |
| Timeline |
| Empire State Realty |
| Stemsation International |
Empire State and Stemsation International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Stemsation International
The main advantage of trading using opposite Empire State and Stemsation International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Stemsation International 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 Stemsation International will offset losses from the drop in Stemsation International's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| Stemsation International vs. Now Corp | Stemsation International vs. Viaderma | Stemsation International vs. China SXT Pharmaceuticals | Stemsation International vs. Rimrock Gold Corp |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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