Correlation Between Realty Income and Vicinity Centres

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Can any of the company-specific risk be diversified away by investing in both Realty Income and Vicinity Centres 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 Vicinity Centres into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Realty Income and Vicinity Centres, you can compare the effects of market volatilities on Realty Income and Vicinity Centres 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 Vicinity Centres. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Vicinity Centres.

Diversification Opportunities for Realty Income and Vicinity Centres

0.71
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Realty Income and Vicinity Centres

Assuming the 90 days horizon Realty Income is expected to generate 0.9 times more return on investment than Vicinity Centres. However, Realty Income is 1.11 times less risky than Vicinity Centres. It trades about -0.11 of its potential returns per unit of risk. Vicinity Centres is currently generating about -0.13 per unit of risk. If you would invest  5,513  in Realty Income on September 23, 2024 and sell it today you would lose (424.00) from holding Realty Income or give up 7.69% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Realty Income  vs.  Vicinity Centres

 Performance 
       Timeline  
Realty Income 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Vicinity Centres 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vicinity Centres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Realty Income and Vicinity Centres Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Realty Income and Vicinity Centres

The main advantage of trading using opposite Realty Income and Vicinity Centres positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income position performs unexpectedly, Vicinity Centres 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 Vicinity Centres will offset losses from the drop in Vicinity Centres' long position.
The idea behind Realty Income and Vicinity Centres 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 Stocks Directory module to find actively traded stocks across global markets.

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