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

0.59

Correlation Coefficient

Douglas Emmett  SL Green

Very weak diversification

The 3 months correlation between Douglas and SLG is 0.59. 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 0.63 times more return on investment than SL Green. However, Douglas Emmett is 1.59 times less risky than SL Green. It trades about 0.37 of its potential returns per unit of risk. SL Green Realty is currently generating about 0.15 per unit of risk. If you would invest  1,293  in Douglas Emmett on February 13, 2024 and sell it today you would earn a total of  151.00  from holding Douglas Emmett or generate 11.68% return on investment over 90 days.

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

Douglas Emmett  vs.  SL Green Realty

Douglas Emmett

Risk-Adjusted Performance

8 of 100

OK

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

SL Green Realty

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 11 (%) 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.