Correlation Between SL Green and Equity Commonwealth
Can any of the company-specific risk be diversified away by investing in both SL Green and Equity Commonwealth 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 SL Green and Equity Commonwealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SL Green Realty and Equity Commonwealth, you can compare the effects of market volatilities on SL Green and Equity Commonwealth 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 SL Green with a short position of Equity Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of SL Green and Equity Commonwealth.
Diversification Opportunities for SL Green and Equity Commonwealth
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SLG-PI and Equity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth and SL Green 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 SL Green Realty are associated (or correlated) with Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of SL Green i.e., SL Green and Equity Commonwealth go up and down completely randomly.
Pair Corralation between SL Green and Equity Commonwealth
Assuming the 90 days trading horizon SL Green Realty is expected to generate 2.83 times more return on investment than Equity Commonwealth. However, SL Green is 2.83 times more volatile than Equity Commonwealth. It trades about 0.04 of its potential returns per unit of risk. Equity Commonwealth is currently generating about 0.04 per unit of risk. 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 |
SL Green Realty vs. Equity Commonwealth
Performance |
| Timeline |
| SL Green Realty |
| Equity Commonwealth |
SL Green and Equity Commonwealth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SL Green and Equity Commonwealth
The main advantage of trading using opposite SL Green and Equity Commonwealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SL Green position performs unexpectedly, Equity Commonwealth 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 Equity Commonwealth will offset losses from the drop in Equity Commonwealth's long position.| SL Green vs. Cousins Properties Incorporated | SL Green vs. Franklin Street Properties | SL Green vs. Creative Media Community | SL Green vs. Vornado Realty Trust |
| Equity Commonwealth vs. Cousins Properties Incorporated | Equity Commonwealth vs. Franklin Street Properties | Equity Commonwealth vs. Creative Media Community | Equity Commonwealth 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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