Correlation Between Empire State and PAX Gold

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

Diversification Opportunities for Empire State and PAX Gold

0.54

Correlation Coefficient

Empire State  PAX Gold

Very weak diversification

The 3 months correlation between Empire and PAX is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and PAX Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX Gold 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 PAX Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAX Gold has no effect on the direction of Empire State i.e., Empire State and PAX Gold go up and down completely randomly.

Pair Corralation between Empire State and PAX Gold

Given the investment horizon of 90 days Empire State is expected to generate 1.74 times less return on investment than PAX Gold. In addition to that, Empire State is 1.19 times more volatile than PAX Gold. It trades about 0.04 of its total potential returns per unit of risk. PAX Gold is currently generating about 0.08 per unit of volatility. If you would invest  249,011  in PAX Gold on September 1, 2024 and sell it today you would earn a total of  14,265  from holding PAX Gold or generate 5.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Empire State Realty  vs.  PAX Gold

Empire State Realty

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empire State is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

PAX Gold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PAX Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, PAX Gold 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 PAX Gold

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

The idea behind Empire State Realty and PAX Gold 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.