Correlation Between Realty Income and Sachem Capital

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Can any of the company-specific risk be diversified away by investing in both Realty Income and Sachem Capital 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 Sachem Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Realty Income and Sachem Capital Corp, you can compare the effects of market volatilities on Realty Income and Sachem Capital 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 Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Sachem Capital.

Diversification Opportunities for Realty Income and Sachem Capital

RealtySachemDiversified AwayRealtySachemDiversified Away100%
0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Realty and Sachem is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of Realty Income i.e., Realty Income and Sachem Capital go up and down completely randomly.

Pair Corralation between Realty Income and Sachem Capital

Taking into account the 90-day investment horizon Realty Income is expected to generate 1.21 times more return on investment than Sachem Capital. However, Realty Income is 1.21 times more volatile than Sachem Capital Corp. It trades about 0.24 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.05 per unit of risk. If you would invest  5,370  in Realty Income on November 23, 2024 and sell it today you would earn a total of  339.00  from holding Realty Income or generate 6.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Realty Income  vs.  Sachem Capital Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15O SCCF
       Timeline  
Realty Income 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Realty Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Realty Income is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb52535455565758
Sachem Capital Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Sachem Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb18.51919.52020.521

Realty Income and Sachem Capital Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.82-1.36-0.9-0.44-0.010.410.871.331.792.25 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15O SCCF
       Returns  

Pair Trading with Realty Income and Sachem Capital

The main advantage of trading using opposite Realty Income and Sachem Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income position performs unexpectedly, Sachem Capital 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 Sachem Capital will offset losses from the drop in Sachem Capital's long position.
The idea behind Realty Income and Sachem Capital Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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