Correlation Between Realty Income and Midcap Growth

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Can any of the company-specific risk be diversified away by investing in both Realty Income and Midcap Growth 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 Midcap Growth 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 Midcap Growth Fund, you can compare the effects of market volatilities on Realty Income and Midcap Growth 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 Midcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Midcap Growth.

Diversification Opportunities for Realty Income and Midcap Growth

-0.88
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Realty and Midcap is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income Corp and MIDCAP GROWTH FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth Fund 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 Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth Fund has no effect on the direction of Realty Income i.e., Realty Income and Midcap Growth go up and down completely randomly.

Pair Corralation between Realty Income and Midcap Growth

Taking into account the 90-day investment horizon Realty Income Corp is expected to generate 0.98 times more return on investment than Midcap Growth. However, Realty Income Corp is 1.02 times less risky than Midcap Growth. It trades about 0.18 of its potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.11 per unit of risk. If you would invest  5,205  in Realty Income Corp on December 29, 2023 and sell it today you would earn a total of  172.00  from holding Realty Income Corp or generate 3.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Realty Income Corp  vs.  MIDCAP GROWTH FUND

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

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Growth Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly fragile basic indicators, Midcap Growth may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Realty Income and Midcap Growth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Realty Income and Midcap Growth

The main advantage of trading using opposite Realty Income and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income position performs unexpectedly, Midcap Growth 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 Midcap Growth will offset losses from the drop in Midcap Growth's long position.
The idea behind Realty Income Corp and Midcap Growth Fund 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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