Correlation Between Douglas Emmett and SL Green

Can any of the company-specific risk be diversified away by investing in both Douglas Emmett 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 Douglas Emmett and SL Green into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Douglas Emmett and SL Green Realty, you can compare the effects of market volatilities on Douglas Emmett 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 Douglas Emmett with a short position of SL Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and SL Green.

Diversification Opportunities for Douglas Emmett and SL Green

0.27

Correlation Coefficient

Douglas Emmett  SL Green

Modest diversification

The 3 months correlation between Douglas and SLG is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett 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 Douglas Emmett 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 Douglas Emmett 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 Douglas Emmett i.e., Douglas Emmett and SL Green go up and down completely randomly.

Pair Corralation between Douglas Emmett and SL Green

Considering the 90-day investment horizon Douglas Emmett is expected to generate 2.2 times less return on investment than SL Green. But when comparing it to its historical volatility, Douglas Emmett is 1.06 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 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,649  in SL Green Realty on January 28, 2024 and sell it today you would earn a total of  412.00  from holding SL Green Realty or generate 8.86% return on investment over 90 days.

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

Douglas Emmett  vs.  SL Green Realty

Douglas Emmett

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

SL Green Realty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, SL Green may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Douglas Emmett and SL Green

The main advantage of trading using opposite Douglas Emmett and SL Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett 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 Douglas Emmett 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.