Correlation Between Brandywine Realty and Realty Income

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

Diversification Opportunities for Brandywine Realty and Realty Income

0.43

Correlation Coefficient

Brandywine Realty  Realty Income

Very weak diversification

The 3 months correlation between Brandywine and Realty is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Brandywine 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 Brandywine 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 Brandywine 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 Brandywine Realty i.e., Brandywine Realty and Realty Income go up and down completely randomly.

Pair Corralation between Brandywine Realty and Realty Income

Considering the 90-day investment horizon Brandywine Realty Trust is expected to generate 2.5 times more return on investment than Realty Income. However, Brandywine Realty is 2.5 times more volatile than Realty Income. It trades about 0.05 of its potential returns per unit of risk. Realty Income is currently generating about -0.06 per unit of risk. If you would invest  491.00  in Brandywine Realty Trust on August 16, 2024 and sell it today you would earn a total of  31.00  from holding Brandywine Realty Trust or generate 6.31% return on investment over 90 days.

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

Brandywine Realty Trust  vs.  Realty Income

Brandywine Realty Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brandywine Realty Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Brandywine Realty may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 very healthy basic indicators, Realty Income is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brandywine Realty and Realty Income

The main advantage of trading using opposite Brandywine Realty and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brandywine 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 Brandywine 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..