Correlation Between Global Net and Gabelli Multimedia

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

Diversification Opportunities for Global Net and Gabelli Multimedia

0.7

Correlation Coefficient

Global Net  Gabelli Multimedia

Poor diversification

The 3 months correlation between Global and Gabelli is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and The Gabelli Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Gabelli Multimedia 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 Gabelli Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Gabelli Multimedia has no effect on the direction of Global Net i.e., Global Net and Gabelli Multimedia go up and down completely randomly.

Pair Corralation between Global Net and Gabelli Multimedia

Assuming the 90 days trading horizon Global Net Lease is expected to under-perform the Gabelli Multimedia. In addition to that, Global Net is 2.17 times more volatile than The Gabelli Multimedia. It trades about -0.16 of its total potential returns per unit of risk. The Gabelli Multimedia is currently generating about 0.02 per unit of volatility. If you would invest  2,286  in The Gabelli Multimedia on September 24, 2024 and sell it today you would earn a total of  4.00  from holding The Gabelli Multimedia or generate 0.17% return on investment over 90 days.

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

Global Net Lease  vs.  The Gabelli Multimedia

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. 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.

The Gabelli Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gabelli Multimedia 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 Gabelli Multimedia

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

The idea behind Global Net Lease and The Gabelli Multimedia 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.