Correlation Between Global Net and Chatham Lodging

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

Diversification Opportunities for Global Net and Chatham Lodging

0.66

Correlation Coefficient

Global Net  Chatham Lodging

Poor diversification

The 3 months correlation between Global and Chatham is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and Chatham Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Lodging Trust 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 Chatham Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Lodging Trust has no effect on the direction of Global Net i.e., Global Net and Chatham Lodging go up and down completely randomly.

Pair Corralation between Global Net and Chatham Lodging

Assuming the 90 days trading horizon Global Net Lease is expected to generate 0.7 times more return on investment than Chatham Lodging. However, Global Net Lease is 1.43 times less risky than Chatham Lodging. It trades about 0.12 of its potential returns per unit of risk. Chatham Lodging Trust is currently generating about 0.05 per unit of risk. If you would invest  2,193  in Global Net Lease on May 6, 2025 and sell it today you would earn a total of  116.00  from holding Global Net Lease or generate 5.29% 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.  Chatham Lodging Trust

Global Net Lease

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global Net is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Chatham Lodging Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chatham Lodging Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chatham Lodging is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Net and Chatham Lodging

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

The idea behind Global Net Lease and Chatham Lodging Trust 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.