Correlation Between SL Green and Blue Ocean

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

Diversification Opportunities for SL Green and Blue Ocean

-0.04

Correlation Coefficient

SL Green  Blue Ocean

Good diversification

The 3 months correlation between SLG and Blue is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Blue Ocean Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Ocean Acquisition 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 Blue Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Ocean Acquisition has no effect on the direction of SL Green i.e., SL Green and Blue Ocean go up and down completely randomly.

Pair Corralation between SL Green and Blue Ocean

Considering the 90-day investment horizon SL Green Realty is expected to generate 2.08 times more return on investment than Blue Ocean. However, SL Green is 2.08 times more volatile than Blue Ocean Acquisition. It trades about 0.06 of its potential returns per unit of risk. Blue Ocean Acquisition is currently generating about 0.02 per unit of risk. If you would invest  3,105  in SL Green Realty on October 10, 2024 and sell it today you would earn a total of  3,461  from holding SL Green Realty or generate 111.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.16%
Values	Daily Returns

SL Green Realty  vs.  Blue Ocean Acquisition

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 nearly stable essential indicators, SL Green is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Blue Ocean Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Ocean Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Blue Ocean is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SL Green and Blue Ocean

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

The idea behind SL Green Realty and Blue Ocean Acquisition 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.