Correlation Between Globe Trade and National Retail

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

By analyzing existing cross correlation between Globe Trade Centre and National Retail Properties, you can compare the effects of market volatilities on Globe Trade and National Retail 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 Globe Trade with a short position of National Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Trade and National Retail.

Diversification Opportunities for Globe Trade and National Retail

0.41

Correlation Coefficient

Globe Trade  National Retail

Very weak diversification

The 3 months correlation between Globe and National is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Globe Trade Centre and National Retail Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Retail Prop and Globe Trade 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 Globe Trade Centre are associated (or correlated) with National Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Retail Prop has no effect on the direction of Globe Trade i.e., Globe Trade and National Retail go up and down completely randomly.

Pair Corralation between Globe Trade and National Retail

Assuming the 90 days trading horizon Globe Trade is expected to generate 11.6 times less return on investment than National Retail. But when comparing it to its historical volatility, Globe Trade Centre is 5.04 times less risky than National Retail. It trades about 0.0 of its potential returns per unit of risk. National Retail Properties is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,214  in National Retail Properties on September 3, 2024 and sell it today you would lose (16.00) from holding National Retail Properties or give up 0.38% of portfolio value over 90 days.

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

Globe Trade Centre  vs.  National Retail Properties

Globe Trade Centre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Trade Centre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Globe Trade is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Globe Trade and National Retail

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

The idea behind Globe Trade Centre and National Retail Properties 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.