Correlation Between SL Green and STAG Industrial

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

Diversification Opportunities for SL Green and STAG Industrial

-0.47

Correlation Coefficient

SL Green  STAG Industrial

Very good diversification

The 3 months correlation between SLG and STAG is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and STAG Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAG Industrial 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 STAG Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAG Industrial has no effect on the direction of SL Green i.e., SL Green and STAG Industrial go up and down completely randomly.

Pair Corralation between SL Green and STAG Industrial

Considering the 90-day investment horizon SL Green Realty is expected to under-perform the STAG Industrial. In addition to that, SL Green is 1.55 times more volatile than STAG Industrial. It trades about -0.09 of its total potential returns per unit of risk. STAG Industrial is currently generating about 0.04 per unit of volatility. If you would invest  3,389  in STAG Industrial on December 26, 2024 and sell it today you would earn a total of  88.00  from holding STAG Industrial or generate 2.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SL Green Realty  vs.  STAG Industrial

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 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.

STAG Industrial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STAG Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, STAG Industrial 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 STAG Industrial

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

The idea behind SL Green Realty and STAG Industrial 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.