Correlation Between Global X and Kensington Hedged

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

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

Diversification Opportunities for Global X and Kensington Hedged

0.67

Correlation Coefficient

Global X  Kensington Hedged

Poor diversification

The 3 months correlation between Global and Kensington is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Global X Russell and Kensington Hedged Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Hedged Premium 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 Russell are associated (or correlated) with Kensington Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Hedged Premium has no effect on the direction of Global X i.e., Global X and Kensington Hedged go up and down completely randomly.

Pair Corralation between Global X and Kensington Hedged

Given the investment horizon of 90 days Global X Russell is expected to generate 1.47 times more return on investment than Kensington Hedged. However, Global X is 1.47 times more volatile than Kensington Hedged Premium. It trades about 0.19 of its potential returns per unit of risk. Kensington Hedged Premium is currently generating about 0.19 per unit of risk. If you would invest  1,552  in Global X Russell on September 2, 2024 and sell it today you would earn a total of  118.00  from holding Global X Russell or generate 7.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Global X Russell  vs.  Kensington Hedged Premium

Global X Russell

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Russell are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kensington Hedged Premium

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Hedged Premium are ranked lower than 14 (%) 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.

Pair Trading with Global X and Kensington Hedged

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

The idea behind Global X Russell and Kensington Hedged Premium 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.