Correlation Between Global Net and Equity Commonwealth

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

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

Diversification Opportunities for Global Net and Equity Commonwealth

-0.69

Correlation Coefficient

Global Net  Equity Commonwealth

Excellent diversification

The 3 months correlation between Global and Equity is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth and Global Net 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 Global Net Lease are associated (or correlated) with Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of Global Net i.e., Global Net and Equity Commonwealth go up and down completely randomly.

Pair Corralation between Global Net and Equity Commonwealth

Assuming the 90 days trading horizon Global Net Lease is expected to generate 1.71 times more return on investment than Equity Commonwealth. However, Global Net is 1.71 times more volatile than Equity Commonwealth. It trades about 0.13 of its potential returns per unit of risk. Equity Commonwealth is currently generating about 0.0 per unit of risk. If you would invest  2,178  in Global Net Lease on August 30, 2024 and sell it today you would earn a total of  161.00  from holding Global Net Lease or generate 7.39% return on investment over 90 days.

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

Global Net Lease  vs.  Equity Commonwealth

Global Net Lease

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Global Net may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Equity Commonwealth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global Net and Equity Commonwealth

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

The idea behind Global Net Lease and Equity Commonwealth 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.