Correlation Between Real Estate and Fundamental Income

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

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

Diversification Opportunities for Real Estate and Fundamental Income

0.71

Correlation Coefficient

Real Estate  Fundamental Income

Poor diversification

The 3 months correlation between Real and Fundamental is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Real Estate and Fundamental Income Net in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Income Net and Real Estate 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 The Real Estate are associated (or correlated) with Fundamental Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Income Net has no effect on the direction of Real Estate i.e., Real Estate and Fundamental Income go up and down completely randomly.

Pair Corralation between Real Estate and Fundamental Income

Given the investment horizon of 90 days The Real Estate is expected to generate 1.03 times more return on investment than Fundamental Income. However, Real Estate is 1.03 times more volatile than Fundamental Income Net. It trades about 0.08 of its potential returns per unit of risk. Fundamental Income Net is currently generating about 0.05 per unit of risk. If you would invest  4,105  in The Real Estate on May 1, 2025 and sell it today you would earn a total of  170.00  from holding The Real Estate or generate 4.14% return on investment over 90 days.

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

The Real Estate  vs.  Fundamental Income Net

Real Estate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Real Estate is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fundamental Income Net

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Income Net are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fundamental Income is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Real Estate and Fundamental Income

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

The idea behind The Real Estate and Fundamental Income Net 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.