Correlation Between Hannon Armstrong and Empire State

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

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

Diversification Opportunities for Hannon Armstrong and Empire State

0.31

Correlation Coefficient

Hannon Armstrong  Empire State

Weak diversification

The 3 months correlation between Hannon and Empire is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hannon Armstrong Sustainable 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 Hannon Armstrong 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 Hannon Armstrong Sustainable 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 Hannon Armstrong i.e., Hannon Armstrong and Empire State go up and down completely randomly.

Pair Corralation between Hannon Armstrong and Empire State

Given the investment horizon of 90 days Hannon Armstrong Sustainable is expected to generate 1.21 times more return on investment than Empire State. However, Hannon Armstrong is 1.21 times more volatile than Empire State Realty. It trades about -0.06 of its potential returns per unit of risk. Empire State Realty is currently generating about -0.16 per unit of risk. If you would invest  2,859  in Hannon Armstrong Sustainable on September 22, 2024 and sell it today you would lose (100.00) from holding Hannon Armstrong Sustainable or give up 3.5% of portfolio value over 90 days.

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

Hannon Armstrong Sustainable  vs.  Empire State Realty

Hannon Armstrong Sus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hannon Armstrong Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Empire State Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire State Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Hannon Armstrong and Empire State

The main advantage of trading using opposite Hannon Armstrong and Empire State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hannon Armstrong 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 Hannon Armstrong Sustainable 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.