Correlation Between Realty Income and MDJM

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

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

Diversification Opportunities for Realty Income and MDJM

0.7

Correlation Coefficient

Realty Income  MDJM

Poor diversification

The 3 months correlation between Realty and MDJM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and MDJM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDJM 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 MDJM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDJM has no effect on the direction of Realty Income i.e., Realty Income and MDJM go up and down completely randomly.

Pair Corralation between Realty Income and MDJM

Taking into account the 90-day investment horizon Realty Income is expected to generate 0.13 times more return on investment than MDJM. However, Realty Income is 7.97 times less risky than MDJM. It trades about 0.13 of its potential returns per unit of risk. MDJM is currently generating about -0.02 per unit of risk. If you would invest  5,281  in Realty Income on October 27, 2024 and sell it today you would earn a total of  153.00  from holding Realty Income or generate 2.9% return on investment over 90 days.

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

Realty Income  vs.  MDJM

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

MDJM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MDJM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Realty Income and MDJM

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

The idea behind Realty Income and MDJM 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.