Correlation Between Empire State and CubeSmart

Can any of the company-specific risk be diversified away by investing in both Empire State and CubeSmart 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 CubeSmart 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 CubeSmart, you can compare the effects of market volatilities on Empire State and CubeSmart 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 CubeSmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and CubeSmart.

Diversification Opportunities for Empire State and CubeSmart

0.63

Correlation Coefficient

Empire State  CubeSmart

Poor diversification

The 3 months correlation between Empire and CubeSmart is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart 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 CubeSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubeSmart has no effect on the direction of Empire State i.e., Empire State and CubeSmart go up and down completely randomly.

Pair Corralation between Empire State and CubeSmart

Given the investment horizon of 90 days Empire State Realty is expected to generate 1.98 times more return on investment than CubeSmart. However, Empire State is 1.98 times more volatile than CubeSmart. It trades about 0.02 of its potential returns per unit of risk. CubeSmart is currently generating about -0.06 per unit of risk. If you would invest  687.00  in Empire State Realty on May 4, 2025 and sell it today you would earn a total of  5.00  from holding Empire State Realty or generate 0.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Empire State Realty  vs.  CubeSmart

Empire State Realty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Empire State is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

CubeSmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days CubeSmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, CubeSmart is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Empire State and CubeSmart

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

The idea behind Empire State Realty and CubeSmart 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.