Correlation Between SL Green and Sea

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

Diversification Opportunities for SL Green and Sea

0.19

Correlation Coefficient

SL Green  Sea

Average diversification

The 3 months correlation between SLG and Sea is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of SL Green i.e., SL Green and Sea go up and down completely randomly.

Pair Corralation between SL Green and Sea

Considering the 90-day investment horizon SL Green Realty is expected to under-perform the Sea. In addition to that, SL Green is 1.28 times more volatile than Sea. It trades about -0.35 of its total potential returns per unit of risk. Sea is currently generating about -0.12 per unit of volatility. If you would invest  11,380  in Sea on September 29, 2024 and sell it today you would lose (508.00) from holding Sea or give up 4.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SL Green Realty  vs.  Sea

SL Green Realty

Risk-Adjusted Performance

0 of 100

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Sea

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SL Green and Sea

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

The idea behind SL Green Realty and Sea 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.