Correlation Between Realty Income and Rithm Property

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

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

Diversification Opportunities for Realty Income and Rithm Property

0.81

Correlation Coefficient

Realty Income  Rithm Property

Very poor diversification

The 3 months correlation between Realty and Rithm is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Rithm Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rithm Property Trust 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 Rithm Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rithm Property Trust has no effect on the direction of Realty Income i.e., Realty Income and Rithm Property go up and down completely randomly.

Pair Corralation between Realty Income and Rithm Property

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Rithm Property. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 2.17 times less risky than Rithm Property. The stock trades about -0.4 of its potential returns per unit of risk. The Rithm Property Trust is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Rithm Property Trust on September 29, 2024 and sell it today you would lose (6.00) from holding Rithm Property Trust or give up 1.97% of portfolio value over 90 days.

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

Realty Income  vs.  Rithm Property Trust

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.

Rithm Property Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rithm Property Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Realty Income and Rithm Property

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

The idea behind Realty Income and Rithm Property Trust 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.