Correlation Between Empire State and Inventrust Properties

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

Diversification Opportunities for Empire State and Inventrust Properties

0.76

Correlation Coefficient

Empire State  Inventrust Properties

Poor diversification

The 3 months correlation between Empire and Inventrust is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Inventrust Properties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inventrust 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 Inventrust Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inventrust Properties has no effect on the direction of Empire State i.e., Empire State and Inventrust Properties go up and down completely randomly.

Pair Corralation between Empire State and Inventrust Properties

Given the investment horizon of 90 days Empire State Realty is expected to generate 1.51 times more return on investment than Inventrust Properties. However, Empire State is 1.51 times more volatile than Inventrust Properties Corp. It trades about 0.06 of its potential returns per unit of risk. Inventrust Properties Corp is currently generating about 0.06 per unit of risk. If you would invest  635.00  in Empire State Realty on June 23, 2024 and sell it today you would earn a total of  466.00  from holding Empire State Realty or generate 73.39% 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.  Inventrust Properties Corp

Empire State Realty

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Empire State unveiled solid returns over the last few months and may actually be approaching a breakup point.

Inventrust Properties

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inventrust Properties Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inventrust Properties unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire State and Inventrust Properties

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

The idea behind Empire State Realty and Inventrust Properties Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.