Correlation Between RL Commercial and MREIT

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

By analyzing existing cross correlation between RL Commercial REIT and MREIT Inc, you can compare the effects of market volatilities on RL Commercial and MREIT 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 RL Commercial with a short position of MREIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of RL Commercial and MREIT.

Diversification Opportunities for RL Commercial and MREIT

0.92

Correlation Coefficient

RL Commercial  MREIT

Almost no diversification

The 3 months correlation between RCR and MREIT is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding RL Commercial REIT and MREIT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MREIT Inc and RL Commercial 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 RL Commercial REIT are associated (or correlated) with MREIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MREIT Inc has no effect on the direction of RL Commercial i.e., RL Commercial and MREIT go up and down completely randomly.

Pair Corralation between RL Commercial and MREIT

Assuming the 90 days trading horizon RL Commercial REIT is expected to generate 1.65 times more return on investment than MREIT. However, RL Commercial is 1.65 times more volatile than MREIT Inc. It trades about 0.48 of its potential returns per unit of risk. MREIT Inc is currently generating about 0.17 per unit of risk. If you would invest  704.00  in RL Commercial REIT on April 23, 2025 and sell it today you would earn a total of  86.00  from holding RL Commercial REIT or generate 12.22% return on investment over 90 days.

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

RL Commercial REIT  vs.  MREIT Inc

RL Commercial REIT

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in RL Commercial REIT are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RL Commercial exhibited solid returns over the last few months and may actually be approaching a breakup point.

MREIT Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MREIT Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, MREIT is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with RL Commercial and MREIT

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

The idea behind RL Commercial REIT and MREIT Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.