Correlation Between Global Net and City Office

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

Diversification Opportunities for Global Net and City Office

0.13

Correlation Coefficient

Global Net  City Office

Average diversification

The 3 months correlation between Global and City is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and City Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office REIT 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 City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office REIT has no effect on the direction of Global Net i.e., Global Net and City Office go up and down completely randomly.

Pair Corralation between Global Net and City Office

Assuming the 90 days trading horizon Global Net Lease is expected to generate 1.04 times more return on investment than City Office. However, Global Net is 1.04 times more volatile than City Office REIT. It trades about 0.07 of its potential returns per unit of risk. City Office REIT is currently generating about -0.09 per unit of risk. If you would invest  2,073  in Global Net Lease on December 20, 2024 and sell it today you would earn a total of  91.00  from holding Global Net Lease or generate 4.39% return on investment over 90 days.

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

Global Net Lease  vs.  City Office REIT

Global Net Lease

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 5 (%) 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.

City Office REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Office REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Global Net and City Office

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

The idea behind Global Net Lease and City Office REIT 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.