Correlation Between Vornado Realty and Net Lease

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

By analyzing existing cross correlation between Vornado Realty Trust and Net Lease Office, you can compare the effects of market volatilities on Vornado Realty and Net Lease 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 Vornado Realty with a short position of Net Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vornado Realty and Net Lease.

Diversification Opportunities for Vornado Realty and Net Lease

-0.17

Correlation Coefficient

Vornado Realty  Net Lease

Good diversification

The 3 months correlation between Vornado and Net is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vornado Realty Trust and Net Lease Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net Lease Office and Vornado Realty 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 Vornado Realty Trust are associated (or correlated) with Net Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net Lease Office has no effect on the direction of Vornado Realty i.e., Vornado Realty and Net Lease go up and down completely randomly.

Pair Corralation between Vornado Realty and Net Lease

Assuming the 90 days trading horizon Vornado Realty is expected to generate 6.71 times less return on investment than Net Lease. But when comparing it to its historical volatility, Vornado Realty Trust is 2.03 times less risky than Net Lease. It trades about 0.02 of its potential returns per unit of risk. Net Lease Office is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,906  in Net Lease Office on October 24, 2024 and sell it today you would earn a total of  1,259  from holding Net Lease Office or generate 66.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.68%
Values	Daily Returns

Vornado Realty Trust  vs.  Net Lease Office

Vornado Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vornado Realty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Net Lease Office

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Net Lease Office are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Net Lease may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vornado Realty and Net Lease

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

The idea behind Vornado Realty Trust and Net Lease Office 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.