Correlation Between Necessity Retail and Spirit Realty

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

By analyzing existing cross correlation between Necessity Retail REIT and Spirit Realty Capital, you can compare the effects of market volatilities on Necessity Retail and Spirit Realty 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 Necessity Retail with a short position of Spirit Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Necessity Retail and Spirit Realty.

Diversification Opportunities for Necessity Retail and Spirit Realty

0.0

Correlation Coefficient

Necessity Retail  Spirit Realty

Pay attention - limited upside

The 3 months correlation between Necessity and Spirit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Necessity Retail REIT and Spirit Realty Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Realty Capital and Necessity Retail 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 Necessity Retail REIT are associated (or correlated) with Spirit Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Realty Capital has no effect on the direction of Necessity Retail i.e., Necessity Retail and Spirit Realty go up and down completely randomly.

Pair Corralation between Necessity Retail and Spirit Realty

If you would invest (100.00) in Spirit Realty Capital on February 11, 2025 and sell it today you would earn a total of  100.00  from holding Spirit Realty Capital or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Necessity Retail REIT  vs.  Spirit Realty Capital

Necessity Retail REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Necessity Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Necessity Retail is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Spirit Realty Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spirit Realty Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Spirit Realty is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Necessity Retail and Spirit Realty

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

The idea behind Necessity Retail REIT and Spirit Realty Capital 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.