Correlation Between Global X and Exchange Traded

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

By analyzing existing cross correlation between Global X Autonomous and Exchange Traded Concepts, you can compare the effects of market volatilities on Global X and Exchange Traded 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 Exchange Traded. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Exchange Traded.

Diversification Opportunities for Global X and Exchange Traded

0.76

Correlation Coefficient

Global X  Exchange Traded

Poor diversification

The 3 months correlation between Global and Exchange is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Global X Autonomous and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Autonomous are associated (or correlated) with Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Global X i.e., Global X and Exchange Traded go up and down completely randomly.

Pair Corralation between Global X and Exchange Traded

Given the investment horizon of 90 days Global X is expected to generate 9.68 times less return on investment than Exchange Traded. But when comparing it to its historical volatility, Global X Autonomous is 1.53 times less risky than Exchange Traded. It trades about 0.04 of its potential returns per unit of risk. Exchange Traded Concepts is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,290  in Exchange Traded Concepts on August 30, 2024 and sell it today you would earn a total of  1,261  from holding Exchange Traded Concepts or generate 38.33% return on investment over 90 days.

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

Global X Autonomous  vs.  Exchange Traded Concepts

Global X Autonomous

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Autonomous are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Global X is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Exchange Traded Concepts

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Traded Concepts are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Exchange Traded showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Exchange Traded

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

The idea behind Global X Autonomous and Exchange Traded Concepts 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 Stocks Directory module to find actively traded stocks across global markets.