Correlation Between Kensington Hedged and Global X

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

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

Diversification Opportunities for Kensington Hedged and Global X

0.57

Correlation Coefficient

Kensington Hedged  Global X

Very weak diversification

The 3 months correlation between Kensington and Global is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Hedged Premium and Global X SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SP and Kensington Hedged 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 Kensington Hedged Premium 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 SP has no effect on the direction of Kensington Hedged i.e., Kensington Hedged and Global X go up and down completely randomly.

Pair Corralation between Kensington Hedged and Global X

Given the investment horizon of 90 days Kensington Hedged is expected to generate 1.13 times less return on investment than Global X. In addition to that, Kensington Hedged is 1.06 times more volatile than Global X SP. It trades about 0.2 of its total potential returns per unit of risk. Global X SP is currently generating about 0.24 per unit of volatility. If you would invest  3,984  in Global X SP on September 5, 2024 and sell it today you would earn a total of  238.00  from holding Global X SP or generate 5.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Kensington Hedged Premium  vs.  Global X SP

Kensington Hedged Premium

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Hedged Premium are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Kensington Hedged is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Global X SP

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X SP are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kensington Hedged and Global X

The main advantage of trading using opposite Kensington Hedged and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kensington Hedged 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 Kensington Hedged Premium and Global X SP 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.