Correlation Between Realty Income and Douglas Emmett

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

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

Diversification Opportunities for Realty Income and Douglas Emmett

-0.63

Correlation Coefficient

Realty Income  Douglas Emmett

Excellent diversification

The 3 months correlation between Realty and Douglas is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett 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 Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of Realty Income i.e., Realty Income and Douglas Emmett go up and down completely randomly.

Pair Corralation between Realty Income and Douglas Emmett

Taking into account the 90-day investment horizon Realty Income is expected to generate 0.54 times more return on investment than Douglas Emmett. However, Realty Income is 1.87 times less risky than Douglas Emmett. It trades about 0.11 of its potential returns per unit of risk. Douglas Emmett is currently generating about -0.07 per unit of risk. 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Realty Income  vs.  Douglas Emmett

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.

Douglas Emmett

Risk-Adjusted Performance

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Realty Income and Douglas Emmett

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

The idea behind Realty Income and Douglas Emmett 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.