Correlation Between SL Green and Alta Equipment

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

Diversification Opportunities for SL Green and Alta Equipment

0.35

Correlation Coefficient

SL Green  Alta Equipment

Weak diversification

The 3 months correlation between SLG and Alta is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group 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 Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of SL Green i.e., SL Green and Alta Equipment go up and down completely randomly.

Pair Corralation between SL Green and Alta Equipment

Considering the 90-day investment horizon SL Green Realty is expected to under-perform the Alta Equipment. But the stock apears to be less risky and, when comparing its historical volatility, SL Green Realty is 1.49 times less risky than Alta Equipment. The stock trades about -0.18 of its potential returns per unit of risk. The Alta Equipment Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  812.00  in Alta Equipment Group on October 25, 2024 and sell it today you would lose (84.00) from holding Alta Equipment Group or give up 10.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.44%
Values	Daily Returns

SL Green Realty  vs.  Alta Equipment Group

SL Green Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SL Green Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Alta Equipment Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SL Green and Alta Equipment

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

The idea behind SL Green Realty and Alta Equipment Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.