Correlation Between Topaz and SL Green

Can any of the company-specific risk be diversified away by investing in both Topaz and SL Green 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 Topaz and SL Green into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Topaz Solar Farms and SL Green Realty, you can compare the effects of market volatilities on Topaz and SL Green 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 Topaz with a short position of SL Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Topaz and SL Green.

Diversification Opportunities for Topaz and SL Green

0.65

Correlation Coefficient

Topaz  SL Green

Poor diversification

The 3 months correlation between Topaz and SLG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Topaz Solar Farms and SL Green Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SL Green Realty and Topaz 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 Topaz Solar Farms are associated (or correlated) with SL Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SL Green Realty has no effect on the direction of Topaz i.e., Topaz and SL Green go up and down completely randomly.

Pair Corralation between Topaz and SL Green

Assuming the 90 days trading horizon Topaz Solar Farms is expected to generate 0.2 times more return on investment than SL Green. However, Topaz Solar Farms is 4.93 times less risky than SL Green. It trades about -0.04 of its potential returns per unit of risk. SL Green Realty is currently generating about -0.09 per unit of risk. If you would invest  9,756  in Topaz Solar Farms on December 29, 2024 and sell it today you would lose (62.00) from holding Topaz Solar Farms or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	60.66%
Values	Daily Returns

Topaz Solar Farms  vs.  SL Green Realty

Topaz Solar Farms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Topaz Solar Farms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Topaz is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 inconsistent 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.

Pair Trading with Topaz and SL Green

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

The idea behind Topaz Solar Farms and SL Green Realty 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.