Correlation Between National Retail and Realty Income

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

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

Diversification Opportunities for National Retail and Realty Income

0.88

Correlation Coefficient

National Retail  Realty Income

Very poor diversification

The 3 months correlation between National and Realty is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Realty Income go up and down completely randomly.

Pair Corralation between National Retail and Realty Income

Considering the 90-day investment horizon National Retail is expected to generate 1.35 times less return on investment than Realty Income. In addition to that, National Retail is 1.19 times more volatile than Realty Income. It trades about 0.07 of its total potential returns per unit of risk. Realty Income is currently generating about 0.11 per unit of volatility. If you would invest  5,197  in Realty Income on December 28, 2024 and sell it today you would earn a total of  419.00  from holding Realty Income or generate 8.06% return on investment over 90 days.

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

National Retail Properties  vs.  Realty Income

National Retail Prop

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Retail Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, National Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Realty Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Realty Income are ranked lower than 8 (%) 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 National Retail and Realty Income

The main advantage of trading using opposite National Retail and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.