Correlation Between Realty Income and Stratus Properties

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

Diversification Opportunities for Realty Income and Stratus Properties

0.63

Correlation Coefficient

Realty Income  Stratus Properties

Poor diversification

The 3 months correlation between Realty and Stratus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income Corp and Stratus Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratus Properties 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 Stratus Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratus Properties has no effect on the direction of Realty Income i.e., Realty Income and Stratus Properties go up and down completely randomly.

Pair Corralation between Realty Income and Stratus Properties

Taking into account the 90-day investment horizon Realty Income Corp is expected to under-perform the Stratus Properties. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income Corp is 2.49 times less risky than Stratus Properties. The stock trades about -0.19 of its potential returns per unit of risk. The Stratus Properties is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,405  in Stratus Properties on March 5, 2024 and sell it today you would lose (20.00) from holding Stratus Properties or give up 0.83% of portfolio value over 90 days.

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

Realty Income Corp  vs.  Stratus Properties

Realty Income Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Realty Income Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Realty Income is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Stratus Properties

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stratus Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratus Properties may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Realty Income and Stratus Properties

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

The idea behind Realty Income Corp and Stratus Properties 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.