Correlation Between Realty Income and Brightspire Capital

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

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

Diversification Opportunities for Realty Income and Brightspire Capital

0.77

Correlation Coefficient

Realty Income  Brightspire Capital

Poor diversification

The 3 months correlation between Realty and Brightspire is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Brightspire Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightspire Capital and Realty Income 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 Realty Income are associated (or correlated) with Brightspire Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightspire Capital has no effect on the direction of Realty Income i.e., Realty Income and Brightspire Capital go up and down completely randomly.

Pair Corralation between Realty Income and Brightspire Capital

Taking into account the 90-day investment horizon Realty Income is expected to generate 0.85 times more return on investment than Brightspire Capital. However, Realty Income is 1.18 times less risky than Brightspire Capital. It trades about 0.12 of its potential returns per unit of risk. Brightspire Capital is currently generating about 0.03 per unit of risk. If you would invest  5,197  in Realty Income on December 29, 2024 and sell it today you would earn a total of  464.00  from holding Realty Income or generate 8.93% return on investment over 90 days.

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

Realty Income  vs.  Brightspire Capital

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.

Brightspire Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brightspire Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Brightspire Capital is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Realty Income and Brightspire Capital

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

The idea behind Realty Income and Brightspire Capital 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.