Correlation Between SL Green and Launch One

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

Diversification Opportunities for SL Green and Launch One

-0.75

Correlation Coefficient

SL Green  Launch One

Pay attention - limited upside

The 3 months correlation between SLG and Launch is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Launch One Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Launch One 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 Launch One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Launch One Acquisition has no effect on the direction of SL Green i.e., SL Green and Launch One go up and down completely randomly.

Pair Corralation between SL Green and Launch One

Considering the 90-day investment horizon SL Green Realty is expected to under-perform the Launch One. But the stock apears to be less risky and, when comparing its historical volatility, SL Green Realty is 10.2 times less risky than Launch One. The stock trades about -0.06 of its potential returns per unit of risk. The Launch One Acquisition is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Launch One Acquisition on October 26, 2024 and sell it today you would earn a total of  5.46  from holding Launch One Acquisition or generate 60.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

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

Launch One Acquisition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Launch One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SL Green and Launch One

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

The idea behind SL Green Realty and Launch One 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.