Thursday, June 16, 2011

REITs for Everybody Now REITs for Nobody Part 2

As a quick follow-up to my first REITs for Everybody Might Now Mean REITs for Nobody, I want to look at REITs and High Yield bonds, which also might simultaneously attract conservative yield buyers and speculative beta chasers.

HYG (iShares High Yield) and IYR (iShares REIT)

With R we can statistically analyze the similarity of REITs and High Yield.

From TimelyPortfolio
From TimelyPortfolio
From TimelyPortfolio

R code (click to download):

#analyze REITs and High Yield   require(quantmod)
require(PerformanceAnalytics)   #get ML/BAC High Yield Index
MLHY <- getSymbols("BAMLHYH0A0HYM2TRIV",src="FRED",auto.assign=FALSE)
#get Wilshire REIT Index
getSymbols("WILLREITIND",src="FRED")   prices <- na.omit(merge(WILLREITIND,MLHY))
colnames(prices) <- c("Wilshire.REIT","MLBAC.HighYield")
returns <- ROC(prices,n=1,type="discrete")   charts.PerformanceSummary(returns,ylog=TRUE,
main="Wilshire REIT Total Return and ML/BAC High Yield",
colorset=c("cadetblue","darkolivegreen3"))   chart.TimeSeries(runCor(returns[,1],returns[,2],n=250),
main="Wilshire REIT Total Return and ML/BAC High Yield
Rolling 1 Year Correlation"
,colorset="cadetblue")   chart.Correlation(returns)

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