Correlation Between Cboe UK and Global Net

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

By analyzing existing cross correlation between Cboe UK Consumer and Global Net Lease, you can compare the effects of market volatilities on Cboe UK and Global Net 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 Cboe UK with a short position of Global Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe UK and Global Net.

Diversification Opportunities for Cboe UK and Global Net

-0.82

Correlation Coefficient

Cboe UK  Global Net

Pay attention - limited upside

The 3 months correlation between Cboe and Global is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of Cboe UK i.e., Cboe UK and Global Net go up and down completely randomly.

Pair Corralation between Cboe UK and Global Net

Assuming the 90 days trading horizon Cboe UK Consumer is expected to generate 0.61 times more return on investment than Global Net. However, Cboe UK Consumer is 1.65 times less risky than Global Net. It trades about 0.28 of its potential returns per unit of risk. Global Net Lease is currently generating about -0.1 per unit of risk. If you would invest  2,770,118  in Cboe UK Consumer on August 31, 2024 and sell it today you would earn a total of  485,346  from holding Cboe UK Consumer or generate 17.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cboe UK Consumer  vs.  Global Net Lease

Pair Trading with Cboe UK and Global Net

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

The idea behind Cboe UK Consumer and Global Net Lease 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.