Correlation Between Global Net and Ascott Residence

Can any of the company-specific risk be diversified away by investing in both Global Net and Ascott Residence 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 Ascott Residence 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 Ascott Residence Trust, you can compare the effects of market volatilities on Global Net and Ascott Residence 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 Ascott Residence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Net and Ascott Residence.

Diversification Opportunities for Global Net and Ascott Residence

-0.42

Correlation Coefficient

Global Net  Ascott Residence

Very good diversification

The 3 months correlation between Global and Ascott is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and Ascott Residence Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascott Residence Trust 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 Ascott Residence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascott Residence Trust has no effect on the direction of Global Net i.e., Global Net and Ascott Residence go up and down completely randomly.

Pair Corralation between Global Net and Ascott Residence

Assuming the 90 days trading horizon Global Net Lease is expected to generate 0.76 times more return on investment than Ascott Residence. However, Global Net Lease is 1.31 times less risky than Ascott Residence. It trades about 0.06 of its potential returns per unit of risk. Ascott Residence Trust is currently generating about -0.08 per unit of risk. If you would invest  2,092  in Global Net Lease on December 21, 2024 and sell it today you would earn a total of  81.00  from holding Global Net Lease or generate 3.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Global Net Lease  vs.  Ascott Residence Trust

Global Net Lease

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Global Net is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ascott Residence Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ascott Residence Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Global Net and Ascott Residence

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

The idea behind Global Net Lease and Ascott Residence Trust 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.