Correlation Between Global Net and PS Business

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

Diversification Opportunities for Global Net and PS Business

-0.61

Correlation Coefficient

Global Net  PS Business

Excellent diversification

The 3 months correlation between Global and PSBYP is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and PS Business Parks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PS Business Parks 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 PS Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PS Business Parks has no effect on the direction of Global Net i.e., Global Net and PS Business go up and down completely randomly.

Pair Corralation between Global Net and PS Business

Assuming the 90 days trading horizon Global Net is expected to generate 1.82 times less return on investment than PS Business. But when comparing it to its historical volatility, Global Net Lease is 2.14 times less risky than PS Business. It trades about 0.04 of its potential returns per unit of risk. PS Business Parks is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,292  in PS Business Parks on September 12, 2024 and sell it today you would earn a total of  108.00  from holding PS Business Parks or generate 8.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	29.35%
Values	Daily Returns

Global Net Lease  vs.  PS Business Parks

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.

PS Business Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PS Business Parks has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PS Business is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Global Net and PS Business

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

The idea behind Global Net Lease and PS Business Parks 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.