Correlation Between Retail Opportunity and Realty Income

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

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

Diversification Opportunities for Retail Opportunity and Realty Income

-0.86

Correlation Coefficient

Retail Opportunity  Realty Income

Pay attention - limited upside

The 3 months correlation between Retail and Realty is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Retail Opportunity Investments and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income and Retail Opportunity 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 Retail Opportunity Investments are associated (or correlated) with Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of Retail Opportunity i.e., Retail Opportunity and Realty Income go up and down completely randomly.

Pair Corralation between Retail Opportunity and Realty Income

Given the investment horizon of 90 days Retail Opportunity Investments is expected to generate 2.16 times more return on investment than Realty Income. However, Retail Opportunity is 2.16 times more volatile than Realty Income. It trades about 0.13 of its potential returns per unit of risk. Realty Income is currently generating about 0.02 per unit of risk. If you would invest  1,222  in Retail Opportunity Investments on October 2, 2024 and sell it today you would earn a total of  516.00  from holding Retail Opportunity Investments or generate 42.23% return on investment over 90 days.

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

Retail Opportunity Investments  vs.  Realty Income

Retail Opportunity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Opportunity Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Retail Opportunity exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Retail Opportunity and Realty Income

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

The idea behind Retail Opportunity Investments and Realty Income 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.