Correlation Between SL Green and SPDR Barclays

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

Diversification Opportunities for SL Green and SPDR Barclays

0.2

Correlation Coefficient

SL Green  SPDR Barclays

Modest diversification

The 3 months correlation between SLG and SPDR is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and SPDR Barclays Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Interm 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 SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Interm has no effect on the direction of SL Green i.e., SL Green and SPDR Barclays go up and down completely randomly.

Pair Corralation between SL Green and SPDR Barclays

Considering the 90-day investment horizon SL Green Realty is expected to under-perform the SPDR Barclays. In addition to that, SL Green is 10.62 times more volatile than SPDR Barclays Intermediate. It trades about -0.06 of its total potential returns per unit of risk. SPDR Barclays Intermediate is currently generating about -0.16 per unit of volatility. If you would invest  3,244  in SPDR Barclays Intermediate on January 30, 2024 and sell it today you would lose (28.00) from holding SPDR Barclays Intermediate or give up 0.86% of portfolio value over 90 days.

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

SL Green Realty  vs.  SPDR Barclays Intermediate

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 unfluctuating essential indicators, SL Green may actually be approaching a critical reversion point that can send shares even higher in May 2024.

SPDR Barclays Interm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SPDR Barclays 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 SPDR Barclays

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

The idea behind SL Green Realty and SPDR Barclays Intermediate 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.