Correlation Between Empire State and Douglas Emmett
Can any of the company-specific risk be diversified away by investing in both Empire State and Douglas Emmett 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 Douglas Emmett 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 Douglas Emmett, you can compare the effects of market volatilities on Empire State and Douglas Emmett 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 Douglas Emmett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Douglas Emmett.
Diversification Opportunities for Empire State and Douglas Emmett
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Empire and Douglas is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett 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 Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of Empire State i.e., Empire State and Douglas Emmett go up and down completely randomly.
Pair Corralation between Empire State and Douglas Emmett
Given the investment horizon of 90 days Empire State is expected to generate 6.52 times less return on investment than Douglas Emmett. But when comparing it to its historical volatility, Empire State Realty is 1.32 times less risky than Douglas Emmett. It trades about 0.04 of its potential returns per unit of risk. Douglas Emmett is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,812 in Douglas Emmett on August 28, 2024 and sell it today you would earn a total of 143.00 from holding Douglas Emmett or generate 7.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire State Realty vs. Douglas Emmett
Performance |
| Timeline |
| Empire State Realty |
| Douglas Emmett |
Empire State and Douglas Emmett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Douglas Emmett
The main advantage of trading using opposite Empire State and Douglas Emmett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Douglas Emmett 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 Douglas Emmett will offset losses from the drop in Douglas Emmett's long position.| Empire State vs. Empire State Realty | Empire State vs. Cousins Properties Incorporated | Empire State vs. Brandywine Realty Trust | Empire State vs. Piedmont Office Realty |
| Douglas Emmett vs. Brandywine Realty Trust | Douglas Emmett vs. Kilroy Realty Corp | Douglas Emmett vs. Piedmont Office Realty | Douglas Emmett vs. City Office |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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