Correlation Between Evolve Canadian and Global X

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

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

Diversification Opportunities for Evolve Canadian and Global X

0.85

Correlation Coefficient

Evolve Canadian  Global X

Very poor diversification

The 3 months correlation between Evolve and Global is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Evolve Canadian Banks and Global X Seasonal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Seasonal and Evolve Canadian 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 Evolve Canadian Banks 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 Seasonal has no effect on the direction of Evolve Canadian i.e., Evolve Canadian and Global X go up and down completely randomly.

Pair Corralation between Evolve Canadian and Global X

Assuming the 90 days trading horizon Evolve Canadian Banks is expected to generate 1.02 times more return on investment than Global X. However, Evolve Canadian is 1.02 times more volatile than Global X Seasonal. It trades about 0.43 of its potential returns per unit of risk. Global X Seasonal is currently generating about 0.12 per unit of risk. If you would invest  717.00  in Evolve Canadian Banks on September 3, 2024 and sell it today you would earn a total of  116.00  from holding Evolve Canadian Banks or generate 16.18% return on investment over 90 days.

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

Evolve Canadian Banks  vs.  Global X Seasonal

Evolve Canadian Banks

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Canadian Banks are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Evolve Canadian displayed solid returns over the last few months and may actually be approaching a breakup point.

Global X Seasonal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Seasonal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Evolve Canadian and Global X

The main advantage of trading using opposite Evolve Canadian and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolve Canadian 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 Evolve Canadian Banks and Global X Seasonal 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.