Correlation Between Realty Income and Ab Global

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

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

Diversification Opportunities for Realty Income and Ab Global

0.3

Correlation Coefficient

Realty Income  Ab Global

Weak diversification

The 3 months correlation between Realty and ARIIX is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income Corp and Ab Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Global Real 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 Corp are associated (or correlated) with Ab Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Global Real has no effect on the direction of Realty Income i.e., Realty Income and Ab Global go up and down completely randomly.

Pair Corralation between Realty Income and Ab Global

Taking into account the 90-day investment horizon Realty Income Corp is expected to generate 1.2 times more return on investment than Ab Global. However, Realty Income is 1.2 times more volatile than Ab Global Real. It trades about -0.01 of its potential returns per unit of risk. Ab Global Real is currently generating about -0.04 per unit of risk. If you would invest  5,418  in Realty Income Corp on January 26, 2024 and sell it today you would lose (51.00) from holding Realty Income Corp or give up 0.94% of portfolio value over 90 days.

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

Realty Income Corp  vs.  Ab Global Real

Realty me Corp

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Realty Income is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Ab Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Global Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ab Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Realty Income and Ab Global

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

The idea behind Realty Income Corp and Ab Global Real 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.