Correlation Between Alta Equipment and Global Net

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

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

Diversification Opportunities for Alta Equipment and Global Net

0.12

Correlation Coefficient

Alta Equipment  Global Net

Average diversification

The 3 months correlation between Alta and Global is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group 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 Alta Equipment 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 Alta Equipment Group 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 Alta Equipment i.e., Alta Equipment and Global Net go up and down completely randomly.

Pair Corralation between Alta Equipment and Global Net

Given the investment horizon of 90 days Alta Equipment Group is expected to generate 2.67 times more return on investment than Global Net. However, Alta Equipment is 2.67 times more volatile than Global Net Lease. It trades about 0.09 of its potential returns per unit of risk. Global Net Lease is currently generating about 0.01 per unit of risk. If you would invest  615.00  in Alta Equipment Group on October 25, 2024 and sell it today you would earn a total of  113.00  from holding Alta Equipment Group or generate 18.37% return on investment over 90 days.

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

Alta Equipment Group  vs.  Global Net Lease

Alta Equipment Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

Global Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alta Equipment and Global Net

The main advantage of trading using opposite Alta Equipment and Global Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment 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 Alta Equipment Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..