Correlation Between Modiv and RMR

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

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

Diversification Opportunities for Modiv and RMR

-0.33

Correlation Coefficient

Modiv  RMR

Very good diversification

The 3 months correlation between Modiv and RMR is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Modiv Inc and RMR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMR Group and Modiv 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 Modiv Inc are associated (or correlated) with RMR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMR Group has no effect on the direction of Modiv i.e., Modiv and RMR go up and down completely randomly.

Pair Corralation between Modiv and RMR

Considering the 90-day investment horizon Modiv Inc is expected to generate 1.59 times more return on investment than RMR. However, Modiv is 1.59 times more volatile than RMR Group. It trades about 0.09 of its potential returns per unit of risk. RMR Group is currently generating about -0.22 per unit of risk. If you would invest  1,461  in Modiv Inc on February 3, 2025 and sell it today you would earn a total of  181.00  from holding Modiv Inc or generate 12.39% return on investment over 90 days.

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

Modiv Inc  vs.  RMR Group

Modiv Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Modiv Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Modiv showed solid returns over the last few months and may actually be approaching a breakup point.

RMR Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days RMR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in June 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Modiv and RMR

The main advantage of trading using opposite Modiv and RMR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modiv position performs unexpectedly, RMR 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 RMR will offset losses from the drop in RMR's long position.

The idea behind Modiv Inc and RMR Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.