Correlation Between US Commodity and Global X

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

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

Diversification Opportunities for US Commodity and Global X

-0.53

Correlation Coefficient

US Commodity  Global X

Excellent diversification

The 3 months correlation between ALUM and Global is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding US Commodity Funds and Global X Wind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Wind and US Commodity 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 US Commodity 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 Wind has no effect on the direction of US Commodity i.e., US Commodity and Global X go up and down completely randomly.

Pair Corralation between US Commodity and Global X

Given the investment horizon of 90 days US Commodity Funds is expected to generate 0.98 times more return on investment than Global X. However, US Commodity Funds is 1.02 times less risky than Global X. It trades about 0.12 of its potential returns per unit of risk. Global X Wind is currently generating about 0.03 per unit of risk. If you would invest  3,100  in US Commodity Funds on September 3, 2024 and sell it today you would earn a total of  221.00  from holding US Commodity Funds or generate 7.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.88%
Values	Daily Returns

US Commodity Funds  vs.  Global X Wind

US Commodity Funds

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days US Commodity Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very fragile basic indicators, US Commodity displayed solid returns over the last few months and may actually be approaching a breakup point.

Global X Wind

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Wind are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Global X is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with US Commodity and Global X

The main advantage of trading using opposite US Commodity and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Commodity 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 US Commodity Funds and Global X Wind 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.