Correlation Between Absolute Core and Global X

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

By analyzing existing cross correlation between Absolute Core Strategy and Global X Funds, you can compare the effects of market volatilities on Absolute Core and Global X 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 Absolute Core with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Core and Global X.

Diversification Opportunities for Absolute Core and Global X

0.07

Correlation Coefficient

Absolute Core  Global X

Significant diversification

The 3 months correlation between Absolute and Global is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Core Strategy and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds and Absolute Core 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 Absolute Core Strategy are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of Absolute Core i.e., Absolute Core and Global X go up and down completely randomly.

Pair Corralation between Absolute Core and Global X

Given the investment horizon of 90 days Absolute Core is expected to generate 2.44 times less return on investment than Global X. But when comparing it to its historical volatility, Absolute Core Strategy is 1.74 times less risky than Global X. It trades about 0.02 of its potential returns per unit of risk. Global X Funds is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,659  in Global X Funds on September 12, 2024 and sell it today you would earn a total of  45.00  from holding Global X Funds or generate 1.69% return on investment over 90 days.

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

Absolute Core Strategy  vs.  Global X Funds

Absolute Core Strategy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Core Strategy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Absolute Core is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Global X Funds

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Global X is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Absolute Core and Global X

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

The idea behind Absolute Core Strategy and Global X Funds 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.