Correlation Between Realty Income and IREIT MarketVector

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

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

Diversification Opportunities for Realty Income and IREIT MarketVector

0.42

Correlation Coefficient

Realty Income  IREIT MarketVector

Very weak diversification

The 3 months correlation between Realty and IREIT is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and iREIT MarketVector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iREIT MarketVector 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 IREIT MarketVector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iREIT MarketVector has no effect on the direction of Realty Income i.e., Realty Income and IREIT MarketVector go up and down completely randomly.

Pair Corralation between Realty Income and IREIT MarketVector

Taking into account the 90-day investment horizon Realty Income is expected to generate 1.17 times more return on investment than IREIT MarketVector. However, Realty Income is 1.17 times more volatile than iREIT MarketVector. It trades about 0.11 of its potential returns per unit of risk. iREIT MarketVector is currently generating about 0.0 per unit of risk. If you would invest  5,190  in Realty Income on December 27, 2024 and sell it today you would earn a total of  426.00  from holding Realty Income or generate 8.21% return on investment over 90 days.

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

Realty Income  vs.  iREIT MarketVector

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.

iREIT MarketVector

Risk-Adjusted Performance

Very Weak

Over the last 90 days iREIT MarketVector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, IREIT MarketVector is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Realty Income and IREIT MarketVector

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

The idea behind Realty Income and iREIT MarketVector 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.