Correlation Between CenterPoint Energy and SL Green

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Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy 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 CenterPoint Energy and SL Green into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and SL Green Realty, you can compare the effects of market volatilities on CenterPoint Energy 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 CenterPoint Energy with a short position of SL Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and SL Green.

Diversification Opportunities for CenterPoint Energy and SL Green

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between CenterPoint and SLG is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy i.e., CenterPoint Energy and SL Green go up and down completely randomly.

Pair Corralation between CenterPoint Energy and SL Green

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 5.79 times less return on investment than SL Green. But when comparing it to its historical volatility, CenterPoint Energy is 2.6 times less risky than SL Green. It trades about 0.03 of its potential returns per unit of risk. SL Green Realty is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,931  in SL Green Realty on September 23, 2024 and sell it today you would earn a total of  3,870  from holding SL Green Realty or generate 132.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

CenterPoint Energy  vs.  SL Green Realty

 Performance 
       Timeline  
CenterPoint Energy 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.
SL Green Realty 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SL Green Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, SL Green is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

CenterPoint Energy and SL Green Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CenterPoint Energy and SL Green

The main advantage of trading using opposite CenterPoint Energy and SL Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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.
The idea behind CenterPoint Energy and SL Green Realty 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.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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