Correlation Between Empire State and Innovator
Can any of the company-specific risk be diversified away by investing in both Empire State and Innovator 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 Innovator 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 Innovator SP 500, you can compare the effects of market volatilities on Empire State and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Innovator.
Diversification Opportunities for Empire State and Innovator
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Empire and Innovator is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of Empire State i.e., Empire State and Innovator go up and down completely randomly.
Pair Corralation between Empire State and Innovator
Given the investment horizon of 90 days Empire State Realty is expected to generate 4.89 times more return on investment than Innovator. However, Empire State is 4.89 times more volatile than Innovator SP 500. It trades about 0.13 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.44 per unit of risk. If you would invest 1,060 in Empire State Realty on September 1, 2024 and sell it today you would earn a total of 36.00 from holding Empire State Realty or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Empire State Realty vs. Innovator SP 500
Performance |
| Timeline |
| Empire State Realty |
| Innovator SP 500 |
Empire State and Innovator Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Innovator
The main advantage of trading using opposite Empire State and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Innovator 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 Innovator will offset losses from the drop in Innovator's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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