Correlation Between ETF Series and Global X

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

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

Diversification Opportunities for ETF Series and Global X

-0.36

Correlation Coefficient

ETF Series  Global X

Very good diversification

The 3 months correlation between ETF and Global is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and Global X Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Dow and ETF Series 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 ETF Series Solutions 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 Dow has no effect on the direction of ETF Series i.e., ETF Series and Global X go up and down completely randomly.

Pair Corralation between ETF Series and Global X

Given the investment horizon of 90 days ETF Series is expected to generate 4.79 times less return on investment than Global X. In addition to that, ETF Series is 1.61 times more volatile than Global X Dow. It trades about 0.02 of its total potential returns per unit of risk. Global X Dow is currently generating about 0.19 per unit of volatility. If you would invest  2,238  in Global X Dow on September 13, 2024 and sell it today you would earn a total of  127.00  from holding Global X Dow or generate 5.67% return on investment over 90 days.

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

ETF Series Solutions  vs.  Global X Dow

ETF Series Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ETF Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global X Dow

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Dow are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Global X is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ETF Series and Global X

The main advantage of trading using opposite ETF Series and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETF Series 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 ETF Series Solutions and Global X Dow 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.