Correlation Between Hudson Pacific and SL Green

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

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

Diversification Opportunities for Hudson Pacific and SL Green

0.79

Correlation Coefficient

Hudson Pacific  SL Green

Poor diversification

The 3 months correlation between Hudson and SLG-PI is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties 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 Hudson Pacific 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 Hudson Pacific Properties 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 Hudson Pacific i.e., Hudson Pacific and SL Green go up and down completely randomly.

Pair Corralation between Hudson Pacific and SL Green

Assuming the 90 days trading horizon Hudson Pacific Properties is expected to generate 2.34 times more return on investment than SL Green. However, Hudson Pacific is 2.34 times more volatile than SL Green Realty. It trades about 0.11 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  1,252  in Hudson Pacific Properties on September 2, 2024 and sell it today you would earn a total of  171.00  from holding Hudson Pacific Properties or generate 13.66% return on investment over 90 days.

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

Hudson Pacific Properties  vs.  SL Green Realty

Hudson Pacific Properties

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Pacific Properties are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Hudson Pacific exhibited 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 fairly unfluctuating technical and fundamental indicators, SL Green may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hudson Pacific and SL Green

The main advantage of trading using opposite Hudson Pacific and SL Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Pacific 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 Hudson Pacific Properties 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.