Correlation Between Global X and Purpose Tactical

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

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

Diversification Opportunities for Global X and Purpose Tactical

0.82

Correlation Coefficient

Global X  Purpose Tactical

Very poor diversification

The 3 months correlation between Global and Purpose is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active and Purpose Tactical Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Tactical Hedged 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 Active are associated (or correlated) with Purpose Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Tactical Hedged has no effect on the direction of Global X i.e., Global X and Purpose Tactical go up and down completely randomly.

Pair Corralation between Global X and Purpose Tactical

Assuming the 90 days trading horizon Global X is expected to generate 1.04 times less return on investment than Purpose Tactical. In addition to that, Global X is 1.77 times more volatile than Purpose Tactical Hedged. It trades about 0.12 of its total potential returns per unit of risk. Purpose Tactical Hedged is currently generating about 0.22 per unit of volatility. If you would invest  3,505  in Purpose Tactical Hedged on September 12, 2024 and sell it today you would earn a total of  201.00  from holding Purpose Tactical Hedged or generate 5.73% return on investment over 90 days.

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

Global X Active  vs.  Purpose Tactical Hedged

Global X Active

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active are ranked lower than 9 (%) 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.

Purpose Tactical Hedged

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Tactical Hedged are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Purpose Tactical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and Purpose Tactical

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

The idea behind Global X Active and Purpose Tactical Hedged 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.