Correlation Between Realty Income and Agree Realty
Can any of the company-specific risk be diversified away by investing in both Realty Income and Agree Realty 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 Agree Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Realty Income Corp and Agree Realty, you can compare the effects of market volatilities on Realty Income and Agree Realty 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 Agree Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Agree Realty.
Diversification Opportunities for Realty Income and Agree Realty
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Realty and Agree is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income Corp and Agree Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agree Realty 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 Corp are associated (or correlated) with Agree Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agree Realty has no effect on the direction of Realty Income i.e., Realty Income and Agree Realty go up and down completely randomly.
Pair Corralation between Realty Income and Agree Realty
Taking into account the 90-day investment horizon Realty Income is expected to generate 1.54 times less return on investment than Agree Realty. In addition to that, Realty Income is 1.08 times more volatile than Agree Realty. It trades about 0.1 of its total potential returns per unit of risk. Agree Realty is currently generating about 0.16 per unit of volatility. If you would invest 5,583 in Agree Realty on January 25, 2024 and sell it today you would earn a total of 254.00 from holding Agree Realty or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Realty Income Corp vs. Agree Realty
Performance |
| Timeline |
| Realty me Corp |
| Agree Realty |
Realty Income and Agree Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Realty Income and Agree Realty
The main advantage of trading using opposite Realty Income and Agree Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income position performs unexpectedly, Agree Realty 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 Agree Realty will offset losses from the drop in Agree Realty's long position.The idea behind Realty Income Corp and Agree Realty 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.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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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