Correlation Between Cohen Steers and Realty Income

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

By analyzing existing cross correlation between Cohen Steers Real and Realty Income, you can compare the effects of market volatilities on Cohen Steers and Realty Income 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 Cohen Steers with a short position of Realty Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cohen Steers and Realty Income.

Diversification Opportunities for Cohen Steers and Realty Income

0.67

Correlation Coefficient

Cohen Steers  Realty Income

Poor diversification

The 3 months correlation between Cohen and Realty is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cohen Steers Real and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income and Cohen Steers 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 Cohen Steers Real are associated (or correlated) with Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of Cohen Steers i.e., Cohen Steers and Realty Income go up and down completely randomly.

Pair Corralation between Cohen Steers and Realty Income

Assuming the 90 days horizon Cohen Steers is expected to generate 2.12 times less return on investment than Realty Income. But when comparing it to its historical volatility, Cohen Steers Real is 1.11 times less risky than Realty Income. It trades about 0.06 of its potential returns per unit of risk. Realty Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,224  in Realty Income on December 21, 2024 and sell it today you would earn a total of  422.00  from holding Realty Income or generate 8.08% return on investment over 90 days.

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

Cohen Steers Real  vs.  Realty Income

Cohen Steers Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Steers Real are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Cohen Steers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Realty Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Realty Income are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Realty Income may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cohen Steers and Realty Income

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

The idea behind Cohen Steers Real and Realty Income 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.