Correlation Between SL Green and ACV Auctions

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

Diversification Opportunities for SL Green and ACV Auctions

0.06

Correlation Coefficient

SL Green  ACV Auctions

Significant diversification

The 3 months correlation between SLG and ACV is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and ACV Auctions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACV Auctions 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 ACV Auctions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACV Auctions has no effect on the direction of SL Green i.e., SL Green and ACV Auctions go up and down completely randomly.

Pair Corralation between SL Green and ACV Auctions

Considering the 90-day investment horizon SL Green Realty is expected to generate 0.83 times more return on investment than ACV Auctions. However, SL Green Realty is 1.2 times less risky than ACV Auctions. It trades about 0.15 of its potential returns per unit of risk. ACV Auctions is currently generating about 0.05 per unit of risk. If you would invest  3,186  in SL Green Realty on August 19, 2024 and sell it today you would earn a total of  4,378  from holding SL Green Realty or generate 137.41% return on investment over 90 days.

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

SL Green Realty  vs.  ACV Auctions

SL Green Realty

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, SL Green reported solid returns over the last few months and may actually be approaching a breakup point.

ACV Auctions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ACV Auctions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, ACV Auctions may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SL Green and ACV Auctions

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

The idea behind SL Green Realty and ACV Auctions 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.