Correlation Between ETRACS Quarterly and Global X

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

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

Diversification Opportunities for ETRACS Quarterly and Global X

0.98

Correlation Coefficient

ETRACS Quarterly  Global X

Almost no diversification

The 3 months correlation between ETRACS and Global is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Quarterly Pay 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 ETRACS Quarterly 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 ETRACS Quarterly Pay 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 ETRACS Quarterly i.e., ETRACS Quarterly and Global X go up and down completely randomly.

Pair Corralation between ETRACS Quarterly and Global X

Given the investment horizon of 90 days ETRACS Quarterly Pay is expected to generate 2.2 times more return on investment than Global X. However, ETRACS Quarterly is 2.2 times more volatile than Global X MLP. It trades about 0.39 of its potential returns per unit of risk. Global X MLP is currently generating about 0.58 per unit of risk. If you would invest  5,508  in ETRACS Quarterly Pay on September 4, 2024 and sell it today you would earn a total of  982.00  from holding ETRACS Quarterly Pay or generate 17.83% return on investment over 90 days.

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

ETRACS Quarterly Pay  vs.  Global X MLP

ETRACS Quarterly Pay

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ETRACS Quarterly reported solid returns over the last few months and may actually be approaching a breakup point.

Global X MLP

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MLP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ETRACS Quarterly and Global X

The main advantage of trading using opposite ETRACS Quarterly and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS Quarterly 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 ETRACS Quarterly Pay 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.