Correlation Between SL Green and Mercantil

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

Diversification Opportunities for SL Green and Mercantil

-0.87

Correlation Coefficient

SL Green  Mercantil

Pay attention - limited upside

The 3 months correlation between SLG and Mercantil is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Mercantil do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercantil do Brasil 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 Mercantil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercantil do Brasil has no effect on the direction of SL Green i.e., SL Green and Mercantil go up and down completely randomly.

Pair Corralation between SL Green and Mercantil

Considering the 90-day investment horizon SL Green Realty is expected to under-perform the Mercantil. In addition to that, SL Green is 1.39 times more volatile than Mercantil do Brasil. It trades about -0.06 of its total potential returns per unit of risk. Mercantil do Brasil is currently generating about 0.24 per unit of volatility. If you would invest  700.00  in Mercantil do Brasil on January 29, 2024 and sell it today you would earn a total of  71.00  from holding Mercantil do Brasil or generate 10.14% return on investment over 90 days.

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

SL Green Realty  vs.  Mercantil do Brasil

SL Green Realty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, SL Green may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Mercantil do Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercantil do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SL Green and Mercantil

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

The idea behind SL Green Realty and Mercantil do Brasil 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.

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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.