Correlation Between Marchex and Net Lease

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

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

Diversification Opportunities for Marchex and Net Lease

0.22

Correlation Coefficient

Marchex  Net Lease

Modest diversification

The 3 months correlation between Marchex and Net is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Marchex and Net Lease Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net Lease Office and Marchex 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 Marchex are associated (or correlated) with Net Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net Lease Office has no effect on the direction of Marchex i.e., Marchex and Net Lease go up and down completely randomly.

Pair Corralation between Marchex and Net Lease

Given the investment horizon of 90 days Marchex is expected to under-perform the Net Lease. In addition to that, Marchex is 1.47 times more volatile than Net Lease Office. It trades about -0.03 of its total potential returns per unit of risk. Net Lease Office is currently generating about 0.0 per unit of volatility. If you would invest  3,069  in Net Lease Office on December 19, 2024 and sell it today you would lose (11.00) from holding Net Lease Office or give up 0.36% of portfolio value over 90 days.

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

Marchex  vs.  Net Lease Office

Marchex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marchex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Net Lease Office

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Marchex and Net Lease

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

The idea behind Marchex and Net Lease Office 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.