Correlation Between SL Green and Verra Mobility

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

Diversification Opportunities for SL Green and Verra Mobility

0.73

Correlation Coefficient

SL Green  Verra Mobility

Poor diversification

The 3 months correlation between SLG and Verra is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Verra Mobility Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verra Mobility Corp 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 Verra Mobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verra Mobility Corp has no effect on the direction of SL Green i.e., SL Green and Verra Mobility go up and down completely randomly.

Pair Corralation between SL Green and Verra Mobility

Considering the 90-day investment horizon SL Green Realty is expected to generate 2.44 times more return on investment than Verra Mobility. However, SL Green is 2.44 times more volatile than Verra Mobility Corp. It trades about 0.12 of its potential returns per unit of risk. Verra Mobility Corp is currently generating about 0.11 per unit of risk. If you would invest  2,026  in SL Green Realty on February 3, 2024 and sell it today you would earn a total of  3,121  from holding SL Green Realty or generate 154.05% return on investment over 90 days.

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

SL Green Realty  vs.  Verra Mobility Corp

SL Green Realty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, SL Green reported solid returns over the last few months and may actually be approaching a breakup point.

Verra Mobility Corp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verra Mobility Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Verra Mobility displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SL Green and Verra Mobility

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

The idea behind SL Green Realty and Verra Mobility Corp 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.