Correlation Between Global X and Health Care

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

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

Diversification Opportunities for Global X and Health Care

0.95

Correlation Coefficient

Global X  Health Care

Almost no diversification

The 3 months correlation between Global and Health is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global X Aging and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select 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 Aging are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Select has no effect on the direction of Global X i.e., Global X and Health Care go up and down completely randomly.

Pair Corralation between Global X and Health Care

Given the investment horizon of 90 days Global X Aging is expected to generate 0.98 times more return on investment than Health Care. However, Global X Aging is 1.02 times less risky than Health Care. It trades about -0.08 of its potential returns per unit of risk. Health Care Select is currently generating about -0.09 per unit of risk. If you would invest  3,229  in Global X Aging on October 24, 2024 and sell it today you would lose (114.00) from holding Global X Aging or give up 3.53% of portfolio value over 90 days.

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

Global X Aging  vs.  Health Care Select

Global X Aging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Aging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Health Care Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Health Care is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Global X and Health Care

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

The idea behind Global X Aging and Health Care Select 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.