Correlation Between Realty Income and Consolidated Communications

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

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

Diversification Opportunities for Realty Income and Consolidated Communications

-0.28

Correlation Coefficient

Realty Income  Consolidated Communications

Very good diversification

The 3 months correlation between Realty and Consolidated is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Consolidated Communications Ho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications 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 Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of Realty Income i.e., Realty Income and Consolidated Communications go up and down completely randomly.

Pair Corralation between Realty Income and Consolidated Communications

Assuming the 90 days horizon Realty Income is expected to under-perform the Consolidated Communications. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 2.37 times less risky than Consolidated Communications. The stock trades about -0.01 of its potential returns per unit of risk. The Consolidated Communications Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  406.00  in Consolidated Communications Holdings on October 4, 2024 and sell it today you would earn a total of  42.00  from holding Consolidated Communications Holdings or generate 10.34% return on investment over 90 days.

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

Realty Income  vs.  Consolidated Communications Ho

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Consolidated Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Realty Income and Consolidated Communications

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

The idea behind Realty Income and Consolidated Communications Holdings 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.