Correlation Between Equinix and Empire State

Can any of the company-specific risk be diversified away by investing in both Equinix and Empire State 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 Equinix and Empire State into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Equinix and Empire State Realty, you can compare the effects of market volatilities on Equinix and Empire State 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 Equinix with a short position of Empire State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinix and Empire State.

Diversification Opportunities for Equinix and Empire State

0.66

Correlation Coefficient

Equinix  Empire State

Poor diversification

The 3 months correlation between Equinix and Empire is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Empire State Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire State Realty and Equinix 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 Equinix are associated (or correlated) with Empire State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire State Realty has no effect on the direction of Equinix i.e., Equinix and Empire State go up and down completely randomly.

Pair Corralation between Equinix and Empire State

Given the investment horizon of 90 days Equinix is expected to generate 1.08 times more return on investment than Empire State. However, Equinix is 1.08 times more volatile than Empire State Realty. It trades about 0.22 of its potential returns per unit of risk. Empire State Realty is currently generating about -0.05 per unit of risk. If you would invest  87,156  in Equinix on August 12, 2024 and sell it today you would earn a total of  4,950  from holding Equinix or generate 5.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Equinix  vs.  Empire State Realty

Equinix

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Equinix may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Empire State Realty

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Empire State may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Equinix and Empire State

The main advantage of trading using opposite Equinix and Empire State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix position performs unexpectedly, Empire State 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 Empire State will offset losses from the drop in Empire State's long position.

The idea behind Equinix and Empire State Realty pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.