Correlation Between Realty Income and Federal Realty

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

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

Diversification Opportunities for Realty Income and Federal Realty

-0.6

Correlation Coefficient

Realty Income  Federal Realty

Excellent diversification

The 3 months correlation between Realty and Federal is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment 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 Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Realty Income i.e., Realty Income and Federal Realty go up and down completely randomly.

Pair Corralation between Realty Income and Federal Realty

Taking into account the 90-day investment horizon Realty Income is expected to generate 0.78 times more return on investment than Federal Realty. However, Realty Income is 1.29 times less risky than Federal Realty. It trades about 0.11 of its potential returns per unit of risk. Federal Realty Investment is currently generating about -0.13 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.  Federal Realty Investment

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.

Federal Realty Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Realty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Realty Income and Federal Realty

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

The idea behind Realty Income and Federal Realty Investment 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 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.