Correlation Between Realty Income and Safehold

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

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

Diversification Opportunities for Realty Income and Safehold

0.81

Correlation Coefficient

Realty Income  Safehold

Very poor diversification

The 3 months correlation between Realty and Safehold is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Safehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safehold 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 Safehold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safehold has no effect on the direction of Realty Income i.e., Realty Income and Safehold go up and down completely randomly.

Pair Corralation between Realty Income and Safehold

Taking into account the 90-day investment horizon Realty Income is expected to generate 0.55 times more return on investment than Safehold. However, Realty Income is 1.8 times less risky than Safehold. It trades about -0.07 of its potential returns per unit of risk. Safehold is currently generating about -0.12 per unit of risk. If you would invest  6,133  in Realty Income on August 30, 2024 and sell it today you would lose (301.00) from holding Realty Income or give up 4.91% of portfolio value over 90 days.

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

Realty Income  vs.  Safehold

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 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.

Safehold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safehold 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Realty Income and Safehold

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

The idea behind Realty Income and Safehold 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.