Correlation Between Realty Income and St Joe

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

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

Diversification Opportunities for Realty Income and St Joe

0.74

Correlation Coefficient

Realty Income  St Joe

Poor diversification

The 3 months correlation between Realty and JOE is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and St Joe Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Joe Company 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 St Joe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Joe Company has no effect on the direction of Realty Income i.e., Realty Income and St Joe go up and down completely randomly.

Pair Corralation between Realty Income and St Joe

Taking into account the 90-day investment horizon Realty Income is expected to generate 0.81 times more return on investment than St Joe. However, Realty Income is 1.23 times less risky than St Joe. It trades about -0.02 of its potential returns per unit of risk. St Joe Company is currently generating about -0.1 per unit of risk. If you would invest  5,706  in Realty Income on November 28, 2024 and sell it today you would lose (96.00) from holding Realty Income or give up 1.68% of portfolio value over 90 days.

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

Realty Income  vs.  St Joe Company

Realty Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Realty Income is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

St Joe Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days St Joe Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Realty Income and St Joe

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

The idea behind Realty Income and St Joe Company 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.