Correlation Between SL Green and Smart REIT

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

Diversification Opportunities for SL Green and Smart REIT

0.09

Correlation Coefficient

SL Green  Smart REIT

Significant diversification

The 3 months correlation between SLG and Smart is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Smart REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart REIT 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 Smart REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart REIT has no effect on the direction of SL Green i.e., SL Green and Smart REIT go up and down completely randomly.

Pair Corralation between SL Green and Smart REIT

Considering the 90-day investment horizon SL Green Realty is expected to under-perform the Smart REIT. In addition to that, SL Green is 1.54 times more volatile than Smart REIT. It trades about -0.12 of its total potential returns per unit of risk. Smart REIT is currently generating about 0.05 per unit of volatility. If you would invest  1,724  in Smart REIT on December 18, 2024 and sell it today you would earn a total of  55.00  from holding Smart REIT or generate 3.19% return on investment over 90 days.

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

SL Green Realty  vs.  Smart REIT

SL Green Realty

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Smart REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Smart REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Smart REIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SL Green and Smart REIT

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

The idea behind SL Green Realty and Smart REIT 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.