Correlation Between United States and Global X

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

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

Diversification Opportunities for United States and Global X

0.43

Correlation Coefficient

United States  Global X

Very weak diversification

The 3 months correlation between United and Global is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding United States Copper and Global X Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Copper and United States 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 United States Copper 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 Copper has no effect on the direction of United States i.e., United States and Global X go up and down completely randomly.

Pair Corralation between United States and Global X

Given the investment horizon of 90 days United States Copper is expected to generate 0.76 times more return on investment than Global X. However, United States Copper is 1.32 times less risky than Global X. It trades about 0.24 of its potential returns per unit of risk. Global X Copper is currently generating about 0.11 per unit of risk. If you would invest  2,552  in United States Copper on December 19, 2024 and sell it today you would earn a total of  580.00  from holding United States Copper or generate 22.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

United States Copper  vs.  Global X Copper

United States Copper

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Copper are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

Global X Copper

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Copper are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Global X showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Global X

The main advantage of trading using opposite United States and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Copper and Global X Copper 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.