Correlation Between Chimera Investment and Global Net

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

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

Diversification Opportunities for Chimera Investment and Global Net

0.87

Correlation Coefficient

Chimera Investment  Global Net

Very poor diversification

The 3 months correlation between Chimera and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Chimera Investment and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease and Chimera Investment 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 Chimera Investment are associated (or correlated) with Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of Chimera Investment i.e., Chimera Investment and Global Net go up and down completely randomly.

Pair Corralation between Chimera Investment and Global Net

Assuming the 90 days trading horizon Chimera Investment is expected to generate 1.4 times less return on investment than Global Net. But when comparing it to its historical volatility, Chimera Investment is 2.56 times less risky than Global Net. It trades about 0.27 of its potential returns per unit of risk. Global Net Lease is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,250  in Global Net Lease on August 1, 2024 and sell it today you would earn a total of  71.00  from holding Global Net Lease or generate 3.16% return on investment over 90 days.

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

Chimera Investment  vs.  Global Net Lease

Chimera Investment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chimera Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Chimera Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Global Net Lease

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Global Net may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Chimera Investment and Global Net

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

The idea behind Chimera Investment and Global Net Lease 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.