Correlation Between FT AlphaDEX and Global X

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

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

Diversification Opportunities for FT AlphaDEX and Global X

-0.39

Correlation Coefficient

FT AlphaDEX  Global X

Very good diversification

The 3 months correlation between FHG and Global is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and Global X Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Semiconductor and FT AlphaDEX 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 FT AlphaDEX Industrials 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 Semiconductor has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and Global X go up and down completely randomly.

Pair Corralation between FT AlphaDEX and Global X

Assuming the 90 days trading horizon FT AlphaDEX is expected to generate 3.64 times less return on investment than Global X. But when comparing it to its historical volatility, FT AlphaDEX Industrials is 1.45 times less risky than Global X. It trades about 0.08 of its potential returns per unit of risk. Global X Semiconductor is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,719  in Global X Semiconductor on September 17, 2024 and sell it today you would earn a total of  206.00  from holding Global X Semiconductor or generate 5.54% return on investment over 90 days.

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

FT AlphaDEX Industrials  vs.  Global X Semiconductor

FT AlphaDEX Industrials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT AlphaDEX Industrials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, FT AlphaDEX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FT AlphaDEX and Global X

The main advantage of trading using opposite FT AlphaDEX and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT AlphaDEX 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 FT AlphaDEX Industrials and Global X Semiconductor 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.