Correlation Between Global X and Evolve Innovation

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

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

Diversification Opportunities for Global X and Evolve Innovation

0.95

Correlation Coefficient

Global X  Evolve Innovation

Almost no diversification

The 3 months correlation between Global and Evolve is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global X Big and Evolve Innovation Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Innovation Index 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 Big are associated (or correlated) with Evolve Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Innovation Index has no effect on the direction of Global X i.e., Global X and Evolve Innovation go up and down completely randomly.

Pair Corralation between Global X and Evolve Innovation

Assuming the 90 days trading horizon Global X Big is expected to generate 2.43 times more return on investment than Evolve Innovation. However, Global X is 2.43 times more volatile than Evolve Innovation Index. It trades about 0.17 of its potential returns per unit of risk. Evolve Innovation Index is currently generating about 0.19 per unit of risk. If you would invest  2,654  in Global X Big on September 15, 2024 and sell it today you would earn a total of  677.00  from holding Global X Big or generate 25.51% return on investment over 90 days.

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

Global X Big  vs.  Evolve Innovation Index

Global X Big

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Big are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X displayed solid returns over the last few months and may actually be approaching a breakup point.

Evolve Innovation Index

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Global X and Evolve Innovation

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

The idea behind Global X Big and Evolve Innovation Index 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.