Correlation Between Realty Income and AG Mortgage

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Can any of the company-specific risk be diversified away by investing in both Realty Income and AG Mortgage 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 AG Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Realty Income and AG Mortgage Investment, you can compare the effects of market volatilities on Realty Income and AG Mortgage 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 AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and AG Mortgage.

Diversification Opportunities for Realty Income and AG Mortgage

-0.84
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Realty and MITN is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of Realty Income i.e., Realty Income and AG Mortgage go up and down completely randomly.

Pair Corralation between Realty Income and AG Mortgage

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the AG Mortgage. In addition to that, Realty Income is 3.65 times more volatile than AG Mortgage Investment. It trades about -0.01 of its total potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.12 per unit of volatility. If you would invest  2,332  in AG Mortgage Investment on October 9, 2024 and sell it today you would earn a total of  204.00  from holding AG Mortgage Investment or generate 8.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy93.93%
ValuesDaily Returns

Realty Income  vs.  AG Mortgage Investment

 Performance 
       Timeline  
Realty Income 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
AG Mortgage Investment 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AG Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Realty Income and AG Mortgage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Realty Income and AG Mortgage

The main advantage of trading using opposite Realty Income and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income position performs unexpectedly, AG Mortgage 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 AG Mortgage will offset losses from the drop in AG Mortgage's long position.
The idea behind Realty Income and AG Mortgage 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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