Correlation Between SL Green and City Office

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

Diversification Opportunities for SL Green and City Office

-0.4

Correlation Coefficient

SL Green  City Office

Very good diversification

The 3 months correlation between SLG and City is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and City Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office REIT 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 City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office REIT has no effect on the direction of SL Green i.e., SL Green and City Office go up and down completely randomly.

Pair Corralation between SL Green and City Office

Considering the 90-day investment horizon SL Green Realty is expected to generate 1.53 times more return on investment than City Office. However, SL Green is 1.53 times more volatile than City Office REIT. It trades about 0.09 of its potential returns per unit of risk. City Office REIT is currently generating about 0.08 per unit of risk. If you would invest  6,766  in SL Green Realty on September 12, 2024 and sell it today you would earn a total of  649.00  from holding SL Green Realty or generate 9.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SL Green Realty  vs.  City Office REIT

SL Green Realty

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, SL Green may actually be approaching a critical reversion point that can send shares even higher in January 2025.

City Office REIT

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City Office REIT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, City Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SL Green and City Office

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

The idea behind SL Green Realty and City Office REIT 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.