Correlation Between Brompton Sustainable and Global X

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

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

Diversification Opportunities for Brompton Sustainable and Global X

-0.31

Correlation Coefficient

Brompton Sustainable  Global X

Very good diversification

The 3 months correlation between Brompton and Global is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Sustainable Real and Global X Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Active and Brompton Sustainable 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 Brompton Sustainable Real 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 Active has no effect on the direction of Brompton Sustainable i.e., Brompton Sustainable and Global X go up and down completely randomly.

Pair Corralation between Brompton Sustainable and Global X

Assuming the 90 days trading horizon Brompton Sustainable Real is expected to generate 3.29 times more return on investment than Global X. However, Brompton Sustainable is 3.29 times more volatile than Global X Active. It trades about 0.11 of its potential returns per unit of risk. Global X Active is currently generating about 0.1 per unit of risk. If you would invest  2,114  in Brompton Sustainable Real on September 23, 2024 and sell it today you would earn a total of  570.00  from holding Brompton Sustainable Real or generate 26.96% return on investment over 90 days.

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

Brompton Sustainable Real  vs.  Global X Active

Brompton Sustainable Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brompton Sustainable Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brompton Sustainable is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Global X Active

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Active has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic 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 Brompton Sustainable and Global X

The main advantage of trading using opposite Brompton Sustainable and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton Sustainable 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 Brompton Sustainable Real and Global X Active 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.