Correlation Between Equity Commonwealth and SL Green
Can any of the company-specific risk be diversified away by investing in both Equity Commonwealth and SL Green 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 Equity Commonwealth and SL Green into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Commonwealth and SL Green Realty, you can compare the effects of market volatilities on Equity Commonwealth and SL Green 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 Equity Commonwealth with a short position of SL Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Commonwealth and SL Green.
Diversification Opportunities for Equity Commonwealth and SL Green
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and SLG-PI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Equity Commonwealth and SL Green Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SL Green Realty and Equity Commonwealth 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 Equity Commonwealth are associated (or correlated) with SL Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SL Green Realty has no effect on the direction of Equity Commonwealth i.e., Equity Commonwealth and SL Green go up and down completely randomly.
Pair Corralation between Equity Commonwealth and SL Green
Assuming the 90 days trading horizon Equity Commonwealth is expected to generate 2.63 times less return on investment than SL Green. But when comparing it to its historical volatility, Equity Commonwealth is 2.83 times less risky than SL Green. It trades about 0.04 of its potential returns per unit of risk. SL Green Realty is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,821 in SL Green Realty on August 23, 2024 and sell it today you would earn a total of 553.00 from holding SL Green Realty or generate 30.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Commonwealth vs. SL Green Realty
Performance |
| Timeline |
| Equity Commonwealth |
| SL Green Realty |
Equity Commonwealth and SL Green Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Commonwealth and SL Green
The main advantage of trading using opposite Equity Commonwealth and SL Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Commonwealth position performs unexpectedly, SL Green 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 SL Green will offset losses from the drop in SL Green's long position.| Equity Commonwealth vs. Cousins Properties Incorporated | Equity Commonwealth vs. Franklin Street Properties | Equity Commonwealth vs. Creative Media Community | Equity Commonwealth vs. Vornado Realty Trust |
| SL Green vs. Cousins Properties Incorporated | SL Green vs. Franklin Street Properties | SL Green vs. Creative Media Community | SL Green vs. Vornado Realty Trust |
Check out your portfolio center.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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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