Correlation Between Global X and Invesco Agriculture

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

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

Diversification Opportunities for Global X and Invesco Agriculture

0.15

Correlation Coefficient

Global X  Invesco Agriculture

Average diversification

The 3 months correlation between Global and Invesco is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Global X Disruptive and Invesco Agriculture Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Agriculture and Global X 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 X Disruptive are associated (or correlated) with Invesco Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Agriculture has no effect on the direction of Global X i.e., Global X and Invesco Agriculture go up and down completely randomly.

Pair Corralation between Global X and Invesco Agriculture

Given the investment horizon of 90 days Global X Disruptive is expected to generate 3.07 times more return on investment than Invesco Agriculture. However, Global X is 3.07 times more volatile than Invesco Agriculture Commodity. It trades about 0.13 of its potential returns per unit of risk. Invesco Agriculture Commodity is currently generating about 0.19 per unit of risk. If you would invest  1,312  in Global X Disruptive on September 12, 2024 and sell it today you would earn a total of  261.00  from holding Global X Disruptive or generate 19.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Global X Disruptive  vs.  Invesco Agriculture Commodity

Global X Disruptive

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Disruptive are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Global X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco Agriculture

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Agriculture Commodity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Invesco Agriculture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and Invesco Agriculture

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

The idea behind Global X Disruptive and Invesco Agriculture Commodity 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.