Correlation Between Realty Income and Phillips Edison

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

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

Diversification Opportunities for Realty Income and Phillips Edison

-0.59

Correlation Coefficient

Realty Income  Phillips Edison

Excellent diversification

The 3 months correlation between Realty and Phillips is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Phillips Edison Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips Edison 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 Phillips Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips Edison has no effect on the direction of Realty Income i.e., Realty Income and Phillips Edison go up and down completely randomly.

Pair Corralation between Realty Income and Phillips Edison

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Phillips Edison. In addition to that, Realty Income is 1.22 times more volatile than Phillips Edison Co. It trades about -0.18 of its total potential returns per unit of risk. Phillips Edison Co is currently generating about 0.08 per unit of volatility. If you would invest  3,591  in Phillips Edison Co on October 7, 2024 and sell it today you would earn a total of  158.00  from holding Phillips Edison Co or generate 4.4% return on investment over 90 days.

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

Realty Income  vs.  Phillips Edison Co

Realty Income

Risk-Adjusted Performance

0 of 100

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.

Phillips Edison

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips Edison Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Phillips Edison is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Realty Income and Phillips Edison

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

The idea behind Realty Income and Phillips Edison Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.