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

0.84

Correlation Coefficient

Empire State  Douglas Emmett

Very poor diversification

The 3 months correlation between Empire and Douglas is 0.84. 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 Realty is expected to under-perform the Douglas Emmett. In addition to that, Empire State is 1.04 times more volatile than Douglas Emmett. It trades about -0.06 of its total potential returns per unit of risk. Douglas Emmett is currently generating about 0.08 per unit of volatility. If you would invest  1,385  in Douglas Emmett on February 6, 2025 and sell it today you would earn a total of  65.00  from holding Douglas Emmett or generate 4.69% return on investment over 90 days.

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

Empire State Realty  vs.  Douglas Emmett

Empire State Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire State Realty 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 quite persistent which may send shares a bit higher in June 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Douglas Emmett

Risk-Adjusted Performance

Very Weak

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

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.

The idea behind Empire State Realty and Douglas Emmett 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.