Correlation Between Realty Income and Armada Hflr

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

By analyzing existing cross correlation between Realty Income and Armada Hflr Pr, you can compare the effects of market volatilities on Realty Income and Armada Hflr 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 Armada Hflr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Armada Hflr.

Diversification Opportunities for Realty Income and Armada Hflr

0.45

Correlation Coefficient

Realty Income  Armada Hflr

Very weak diversification

The 3 months correlation between Realty and Armada is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Armada Hflr Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Hflr Pr 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 are associated (or correlated) with Armada Hflr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Hflr Pr has no effect on the direction of Realty Income i.e., Realty Income and Armada Hflr go up and down completely randomly.

Pair Corralation between Realty Income and Armada Hflr

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Armada Hflr. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 1.36 times less risky than Armada Hflr. The stock trades about -0.01 of its potential returns per unit of risk. The Armada Hflr Pr is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Armada Hflr Pr on September 26, 2024 and sell it today you would earn a total of  13.00  from holding Armada Hflr Pr or generate 1.29% return on investment over 90 days.

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

Realty Income  vs.  Armada Hflr Pr

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Armada Hflr is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Realty Income and Armada Hflr

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

The idea behind Realty Income and Armada Hflr Pr 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.