Correlation Between Realty Income and Netstreit Corp

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

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

Diversification Opportunities for Realty Income and Netstreit Corp

0.47

Correlation Coefficient

Realty Income  Netstreit Corp

Very weak diversification

The 3 months correlation between Realty and Netstreit is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Netstreit Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netstreit Corp 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 Netstreit Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netstreit Corp has no effect on the direction of Realty Income i.e., Realty Income and Netstreit Corp go up and down completely randomly.

Pair Corralation between Realty Income and Netstreit Corp

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Netstreit Corp. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 1.27 times less risky than Netstreit Corp. The stock trades about -0.08 of its potential returns per unit of risk. The Netstreit Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,678  in Netstreit Corp on August 31, 2024 and sell it today you would lose (46.00) from holding Netstreit Corp or give up 2.74% of portfolio value over 90 days.

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

Realty Income  vs.  Netstreit Corp

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 newest stock price disarray, may contribute to short-term losses for the investors.

Netstreit Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netstreit Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Netstreit Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Realty Income and Netstreit Corp

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

The idea behind Realty Income and Netstreit Corp 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.