Correlation Between Global X and Global X

Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and Global X 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 Global X MLP, you can compare the effects of market volatilities on Global X 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 Global X with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Global X.

Diversification Opportunities for Global X and Global X

0.98

Correlation Coefficient

Global X  Global X

Almost no diversification

The 3 months correlation between Global and Global is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Global X MLP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MLP 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 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 MLP has no effect on the direction of Global X i.e., Global X and Global X go up and down completely randomly.

Pair Corralation between Global X and Global X

Given the investment horizon of 90 days Global X is expected to generate 1.27 times less return on investment than Global X. But when comparing it to its historical volatility, Global X Funds is 7.09 times less risky than Global X. It trades about 0.24 of its potential returns per unit of risk. Global X MLP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,028  in Global X MLP on September 14, 2024 and sell it today you would earn a total of  61.00  from holding Global X MLP or generate 1.01% 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.  Global X MLP

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Global X MLP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MLP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Global X showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Global X

The main advantage of trading using opposite Global X and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Funds and Global X MLP 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.