Correlation Between Vornado Realty and Realty Income

Can any of the company-specific risk be diversified away by investing in both Vornado Realty 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 Vornado Realty and Realty Income 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 Realty Income, you can compare the effects of market volatilities on Vornado Realty 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 Vornado Realty with a short position of Realty Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vornado Realty and Realty Income.

Diversification Opportunities for Vornado Realty and Realty Income

-0.48

Correlation Coefficient

Vornado Realty  Realty Income

Very good diversification

The 3 months correlation between Vornado and Realty is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vornado Realty Trust and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income 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 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 Vornado Realty i.e., Vornado Realty and Realty Income go up and down completely randomly.

Pair Corralation between Vornado Realty and Realty Income

Considering the 90-day investment horizon Vornado Realty Trust is expected to generate 2.27 times more return on investment than Realty Income. However, Vornado Realty is 2.27 times more volatile than Realty Income. It trades about 0.0 of its potential returns per unit of risk. Realty Income is currently generating about -0.31 per unit of risk. If you would invest  4,236  in Vornado Realty Trust on September 24, 2024 and sell it today you would lose (31.00) from holding Vornado Realty Trust or give up 0.73% of portfolio value over 90 days.

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

Vornado Realty Trust  vs.  Realty Income

Vornado Realty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vornado Realty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vornado Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Vornado Realty and Realty Income

The main advantage of trading using opposite Vornado Realty and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vornado Realty 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 Vornado Realty Trust 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.