Correlation Between Empire State and COPT Defense
Can any of the company-specific risk be diversified away by investing in both Empire State and COPT Defense 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 COPT Defense 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 COPT Defense Properties, you can compare the effects of market volatilities on Empire State and COPT Defense 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 COPT Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and COPT Defense.
Diversification Opportunities for Empire State and COPT Defense
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Empire and COPT is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and COPT Defense Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COPT Defense Properties 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 COPT Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COPT Defense Properties has no effect on the direction of Empire State i.e., Empire State and COPT Defense go up and down completely randomly.
Pair Corralation between Empire State and COPT Defense
Given the investment horizon of 90 days Empire State Realty is expected to generate 1.04 times more return on investment than COPT Defense. However, Empire State is 1.04 times more volatile than COPT Defense Properties. It trades about 0.05 of its potential returns per unit of risk. COPT Defense Properties is currently generating about 0.04 per unit of risk. If you would invest 1,085 in Empire State Realty on August 30, 2024 and sell it today you would earn a total of 15.00 from holding Empire State Realty or generate 1.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Empire State Realty vs. COPT Defense Properties
Performance |
| Timeline |
| Empire State Realty |
| COPT Defense Properties |
Empire State and COPT Defense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and COPT Defense
The main advantage of trading using opposite Empire State and COPT Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, COPT Defense 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 COPT Defense will offset losses from the drop in COPT Defense's long position.| Empire State vs. Boston Properties | Empire State vs. Douglas Emmett | Empire State vs. Kilroy Realty Corp | Empire State vs. Alexandria Real Estate |
| COPT Defense vs. Realty Income | COPT Defense vs. First Industrial Realty | COPT Defense vs. Healthcare Realty Trust | COPT Defense vs. Park Hotels Resorts |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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