Correlation Between Global Net and Hovnanian Enterprises

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

Diversification Opportunities for Global Net and Hovnanian Enterprises

0.35

Correlation Coefficient

Global Net  Hovnanian Enterprises

Weak diversification

The 3 months correlation between Global and Hovnanian is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and Hovnanian Enterprises PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hovnanian Enterprises PFD 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 Hovnanian Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hovnanian Enterprises PFD has no effect on the direction of Global Net i.e., Global Net and Hovnanian Enterprises go up and down completely randomly.

Pair Corralation between Global Net and Hovnanian Enterprises

Assuming the 90 days trading horizon Global Net Lease is expected to generate 5.86 times more return on investment than Hovnanian Enterprises. However, Global Net is 5.86 times more volatile than Hovnanian Enterprises PFD. It trades about 0.15 of its potential returns per unit of risk. Hovnanian Enterprises PFD is currently generating about 0.01 per unit of risk. If you would invest  2,226  in Global Net Lease on July 1, 2024 and sell it today you would earn a total of  81.00  from holding Global Net Lease or generate 3.64% return on investment over 90 days.

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

Global Net Lease  vs.  Hovnanian Enterprises PFD

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 sustained solid returns over the last few months and may actually be approaching a breakup point.

Hovnanian Enterprises PFD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hovnanian Enterprises PFD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hovnanian Enterprises 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 Hovnanian Enterprises

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

The idea behind Global Net Lease and Hovnanian Enterprises PFD 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.