Correlation Between Global Net and DigitalBridge

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

Diversification Opportunities for Global Net and DigitalBridge

0.96

Correlation Coefficient

Global Net  DigitalBridge

Almost no diversification

The 3 months correlation between Global and DigitalBridge is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and DigitalBridge Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalBridge Group 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 DigitalBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalBridge Group has no effect on the direction of Global Net i.e., Global Net and DigitalBridge go up and down completely randomly.

Pair Corralation between Global Net and DigitalBridge

Assuming the 90 days trading horizon Global Net Lease is expected to generate 1.16 times more return on investment than DigitalBridge. However, Global Net is 1.16 times more volatile than DigitalBridge Group. It trades about 0.15 of its potential returns per unit of risk. DigitalBridge Group is currently generating about -0.04 per unit of risk. 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Global Net Lease  vs.  DigitalBridge Group

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.

DigitalBridge Group

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Global Net and DigitalBridge

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

The idea behind Global Net Lease and DigitalBridge Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.