Correlation Between Empire State and Kilroy Realty

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

Diversification Opportunities for Empire State and Kilroy Realty

0.3

Correlation Coefficient

Empire State  Kilroy Realty

Weak diversification

The 3 months correlation between Empire and Kilroy is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Kilroy Realty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilroy Realty Corp 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 Kilroy Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilroy Realty Corp has no effect on the direction of Empire State i.e., Empire State and Kilroy Realty go up and down completely randomly.

Pair Corralation between Empire State and Kilroy Realty

Given the investment horizon of 90 days Empire State Realty is expected to generate 1.9 times more return on investment than Kilroy Realty. However, Empire State is 1.9 times more volatile than Kilroy Realty Corp. It trades about 0.03 of its potential returns per unit of risk. Kilroy Realty Corp is currently generating about -0.02 per unit of risk. If you would invest  777.00  in Empire State Realty on March 22, 2024 and sell it today you would earn a total of  128.00  from holding Empire State Realty or generate 16.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	71.64%
Values	Daily Returns

Empire State Realty  vs.  Kilroy Realty Corp

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. Even with unfluctuating performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Kilroy Realty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kilroy Realty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Empire State and Kilroy Realty

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

The idea behind Empire State Realty and Kilroy Realty 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.