Correlation Between Amazon and Realty Income

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

Diversification Opportunities for Amazon and Realty Income

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Amazon and Realty is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Realty Income Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income Corp and Amazon 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 Amazon Inc 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 Income Corp has no effect on the direction of Amazon i.e., Amazon and Realty Income go up and down completely randomly.

Pair Corralation between Amazon and Realty Income

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Realty Income. In addition to that, Amazon is 1.92 times more volatile than Realty Income Corp. It trades about -0.03 of its total potential returns per unit of risk. Realty Income Corp is currently generating about 0.03 per unit of volatility. If you would invest  5,390  in Realty Income Corp on September 2, 2022 and sell it today you would earn a total of  891.00  from holding Realty Income Corp or generate 16.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Realty Income Corp

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Realty Income Corp 
Realty Performance
0 of 100
Over the last 90 days Realty Income Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Realty Income is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Realty Price Channel

Amazon and Realty Income Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Realty Income

The main advantage of trading using opposite Amazon and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon Inc 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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