Correlation Between SL Green and Vanguard Index

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

Diversification Opportunities for SL Green and Vanguard Index

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between SL Green and Vanguard is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Vanguard Index Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Trust 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 Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Trust has no effect on the direction of SL Green i.e., SL Green and Vanguard Index go up and down completely randomly.

Pair Corralation between SL Green and Vanguard Index

Considering the 90-day investment horizon SL Green Realty is expected to generate 1.74 times more return on investment than Vanguard Index. However, SL Green is 1.74 times more volatile than Vanguard Index Trust. It trades about 0.29 of its potential returns per unit of risk. Vanguard Index Trust is currently generating about 0.44 per unit of risk. If you would invest  4,451  in SL Green Realty on May 15, 2022 and sell it today you would earn a total of  626.00  from holding SL Green Realty or generate 14.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

SL Green Realty  vs.  Vanguard Index Trust

 Performance (%) 
       Timeline  
SL Green Realty 
SL Green Performance
0 of 100
Over the last 90 days SL Green Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in September 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SL Green Price Channel

Vanguard Index Trust 
Vanguard Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Index Trust are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Index may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Vanguard Price Channel

SL Green and Vanguard Index Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SL Green and Vanguard Index

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

Vanguard Index Trust

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Vanguard Index as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Vanguard Index's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Vanguard Index's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Vanguard Index Trust.
Check out your portfolio center. 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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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