Correlation Between Russell Equity and Global X

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

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

Diversification Opportunities for Russell Equity and Global X

0.46

Correlation Coefficient

Russell Equity  Global X

Very weak diversification

The 3 months correlation between Russell and Global is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Russell Equity Income 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 Russell Equity 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 Russell Equity Income 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 Russell Equity i.e., Russell Equity and Global X go up and down completely randomly.

Pair Corralation between Russell Equity and Global X

Given the investment horizon of 90 days Russell Equity Income is expected to generate 0.65 times more return on investment than Global X. However, Russell Equity Income is 1.53 times less risky than Global X. It trades about 0.13 of its potential returns per unit of risk. Global X Funds is currently generating about 0.03 per unit of risk. 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

Russell Equity Income  vs.  Global X Funds

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.

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.

Pair Trading with Russell Equity and Global X

The main advantage of trading using opposite Russell Equity and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell Equity 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 Russell Equity Income 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.