Correlation Between Affiliated Managers and Realty Income

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

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

Diversification Opportunities for Affiliated Managers and Realty Income

0.81

Correlation Coefficient

Affiliated Managers  Realty Income

Very poor diversification

The 3 months correlation between Affiliated and Realty is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group, and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income and Affiliated Managers 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 Affiliated Managers Group, 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 Affiliated Managers i.e., Affiliated Managers and Realty Income go up and down completely randomly.

Pair Corralation between Affiliated Managers and Realty Income

Given the investment horizon of 90 days Affiliated Managers Group, is expected to generate 1.09 times more return on investment than Realty Income. However, Affiliated Managers is 1.09 times more volatile than Realty Income. It trades about -0.06 of its potential returns per unit of risk. Realty Income is currently generating about -0.11 per unit of risk. If you would invest  1,945  in Affiliated Managers Group, on October 8, 2024 and sell it today you would lose (62.00) from holding Affiliated Managers Group, or give up 3.19% of portfolio value over 90 days.

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

Affiliated Managers Group,  vs.  Realty Income

Affiliated Managers

Risk-Adjusted Performance

0 of 100

Very Weak

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

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income 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 Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Affiliated Managers and Realty Income

The main advantage of trading using opposite Affiliated Managers and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Managers 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 Affiliated Managers Group, 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.