Correlation Between International Drawdown and Global X

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

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

Diversification Opportunities for International Drawdown and Global X

-0.54

Correlation Coefficient

International Drawdown  Global X

Excellent diversification

The 3 months correlation between International and Global is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding International Drawdown Managed and Global X NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ and International Drawdown 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 International Drawdown Managed 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 NASDAQ has no effect on the direction of International Drawdown i.e., International Drawdown and Global X go up and down completely randomly.

Pair Corralation between International Drawdown and Global X

Given the investment horizon of 90 days International Drawdown Managed is expected to under-perform the Global X. In addition to that, International Drawdown is 2.13 times more volatile than Global X NASDAQ. It trades about -0.03 of its total potential returns per unit of risk. Global X NASDAQ is currently generating about 0.17 per unit of volatility. If you would invest  1,658  in Global X NASDAQ on September 20, 2024 and sell it today you would earn a total of  60.00  from holding Global X NASDAQ or generate 3.62% return on investment over 90 days.

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

International Drawdown Managed  vs.  Global X NASDAQ

International Drawdown

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Drawdown Managed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, International Drawdown is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Global X NASDAQ

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X NASDAQ are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Global X is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with International Drawdown and Global X

The main advantage of trading using opposite International Drawdown and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Drawdown 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 International Drawdown Managed and Global X NASDAQ 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.