Correlation Between Global X and Russell Equity

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

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

Diversification Opportunities for Global X and Russell Equity

0.46

Correlation Coefficient

Global X  Russell Equity

Very weak diversification

The 3 months correlation between Global and Russell is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Russell Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell Equity Income 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 Funds are associated (or correlated) with Russell Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell Equity Income has no effect on the direction of Global X i.e., Global X and Russell Equity go up and down completely randomly.

Pair Corralation between Global X and Russell Equity

Considering the 90-day investment horizon Global X is expected to generate 2.45 times less return on investment than Russell Equity. In addition to that, Global X is 1.53 times more volatile than Russell Equity Income. It trades about 0.03 of its total potential returns per unit of risk. Russell Equity Income is currently generating about 0.13 per unit of volatility. If you would invest  4,561  in Russell Equity Income on September 5, 2024 and sell it today you would earn a total of  228.00  from holding Russell Equity Income or generate 5.0% return on investment over 90 days.

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

Global X Funds  vs.  Russell Equity Income

Global X Funds

Risk-Adjusted Performance

2 of 100

Weak

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Russell Equity Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Russell Equity Income are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Russell Equity is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and Russell Equity

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

The idea behind Global X Funds and Russell Equity Income 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.