Correlation Between Macerich and Realty Income

Can any of the company-specific risk be diversified away by investing in both Macerich 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 Macerich and Realty Income into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macerich Company and Realty Income, you can compare the effects of market volatilities on Macerich 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 Macerich with a short position of Realty Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macerich and Realty Income.

Diversification Opportunities for Macerich and Realty Income

0.45

Correlation Coefficient

Macerich  Realty Income

Very weak diversification

The 3 months correlation between Macerich and Realty is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Macerich Company and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income and Macerich 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 Macerich Company 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 Macerich i.e., Macerich and Realty Income go up and down completely randomly.

Pair Corralation between Macerich and Realty Income

Considering the 90-day investment horizon Macerich is expected to generate 1.16 times less return on investment than Realty Income. In addition to that, Macerich is 2.6 times more volatile than Realty Income. It trades about 0.06 of its total potential returns per unit of risk. Realty Income is currently generating about 0.17 per unit of volatility. If you would invest  5,060  in Realty Income on July 11, 2024 and sell it today you would earn a total of  1,091  from holding Realty Income or generate 21.56% return on investment over 90 days.

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

Macerich Company  vs.  Realty Income

Macerich

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macerich Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Macerich exhibited solid returns over the last few months and may actually be approaching a breakup point.

Realty Income

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Realty Income are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Realty Income may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Macerich and Realty Income

The main advantage of trading using opposite Macerich and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macerich 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 Macerich Company 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.