Correlation Between TRAVEL + and Realty Income

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Realty Income, you can compare the effects of market volatilities on TRAVEL + 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 TRAVEL + with a short position of Realty Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and Realty Income.

Diversification Opportunities for TRAVEL + and Realty Income

-0.53

Correlation Coefficient

TRAVEL +  Realty Income

Excellent diversification

The 3 months correlation between TRAVEL and Realty is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income and TRAVEL + 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 TRAVEL LEISURE DL 01 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 has no effect on the direction of TRAVEL + i.e., TRAVEL + and Realty Income go up and down completely randomly.

Pair Corralation between TRAVEL + and Realty Income

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 1.74 times more return on investment than Realty Income. However, TRAVEL + is 1.74 times more volatile than Realty Income. It trades about 0.26 of its potential returns per unit of risk. Realty Income is currently generating about -0.06 per unit of risk. If you would invest  3,757  in TRAVEL LEISURE DL 01 on April 23, 2025 and sell it today you would earn a total of  1,143  from holding TRAVEL LEISURE DL 01 or generate 30.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

TRAVEL LEISURE DL 01  vs.  Realty Income

TRAVEL LEISURE DL

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Realty Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Realty Income is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAVEL + and Realty Income

The main advantage of trading using opposite TRAVEL + and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL + 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.

The idea behind TRAVEL LEISURE DL 01 and Realty Income 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.