Correlation Between Global X and VanEck Energy

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

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

Diversification Opportunities for Global X and VanEck Energy

0.97

Correlation Coefficient

Global X  VanEck Energy

Almost no diversification

The 3 months correlation between Global and VanEck is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and VanEck Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Energy Income 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 Funds are associated (or correlated) with VanEck Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Energy Income has no effect on the direction of Global X i.e., Global X and VanEck Energy go up and down completely randomly.

Pair Corralation between Global X and VanEck Energy

Given the investment horizon of 90 days Global X is expected to generate 2.5 times less return on investment than VanEck Energy. But when comparing it to its historical volatility, Global X Funds is 4.0 times less risky than VanEck Energy. It trades about 0.27 of its potential returns per unit of risk. VanEck Energy Income is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,445  in VanEck Energy Income on September 15, 2024 and sell it today you would earn a total of  1,037  from holding VanEck Energy Income or generate 12.28% 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 Funds  vs.  VanEck Energy Income

Global X Funds

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VanEck Energy Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Energy Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, VanEck Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and VanEck Energy

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

The idea behind Global X Funds and VanEck Energy Income 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.