Correlation Between Equity Lifestyle and Realty Income

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

Diversification Opportunities for Equity Lifestyle and Realty Income

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Equity and Realty is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Equity Lifestyle Properties and Realty Income Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty me Corp and Equity Lifestyle 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 Equity Lifestyle Properties are associated (or correlated) with Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty me Corp has no effect on the direction of Equity Lifestyle i.e., Equity Lifestyle and Realty Income go up and down completely randomly.

Pair Corralation between Equity Lifestyle and Realty Income

Considering the 90-day investment horizon Equity Lifestyle Properties is expected to generate 1.21 times more return on investment than Realty Income. However, Equity Lifestyle is 1.21 times more volatile than Realty Income Corp. It trades about 0.01 of its potential returns per unit of risk. Realty Income Corp is currently generating about -0.01 per unit of risk. If you would invest  6,318  in Equity Lifestyle Properties on December 19, 2023 and sell it today you would earn a total of  189.00  from holding Equity Lifestyle Properties or generate 2.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Equity Lifestyle Properties  vs.  Realty Income Corp

 Performance 
       Timeline  
Equity Lifestyle Pro 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Equity Lifestyle Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Realty me Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Realty Income Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Equity Lifestyle and Realty Income Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Equity Lifestyle and Realty Income

The main advantage of trading using opposite Equity Lifestyle and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Lifestyle position performs unexpectedly, Realty 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 Realty Income will offset losses from the drop in Realty Income's long position.
The idea behind Equity Lifestyle Properties and Realty Income 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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