Correlation Between Realty Income and Power REIT
Can any of the company-specific risk be diversified away by investing in both Realty Income and Power REIT 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 Power REIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Realty Income and Power REIT, you can compare the effects of market volatilities on Realty Income and Power REIT 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 Power REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Power REIT.
Diversification Opportunities for Realty Income and Power REIT
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Realty and Power is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT 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 Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT has no effect on the direction of Realty Income i.e., Realty Income and Power REIT go up and down completely randomly.
Pair Corralation between Realty Income and Power REIT
Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Power REIT. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 4.25 times less risky than Power REIT. The stock trades about -0.21 of its potential returns per unit of risk. The Power REIT is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 114.00 in Power REIT on August 29, 2024 and sell it today you would earn a total of 8.00 from holding Power REIT or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Realty Income vs. Power REIT
Performance |
| Timeline |
| Realty Income |
| Power REIT |
Realty Income and Power REIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Realty Income and Power REIT
The main advantage of trading using opposite Realty Income and Power REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income position performs unexpectedly, Power REIT 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 Power REIT will offset losses from the drop in Power REIT's long position.| Realty Income vs. Federal Realty Investment | Realty Income vs. Macerich Company | Realty Income vs. National Retail Properties | Realty Income vs. Kimco Realty |
| Power REIT vs. Newlake Capital Partners | Power REIT vs. Outfront Media | Power REIT vs. Uniti Group | Power REIT vs. Farmland Partners |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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