Correlation Between Dimensional Global and Global X

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

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

Diversification Opportunities for Dimensional Global and Global X

0.63

Correlation Coefficient

Dimensional Global  Global X

Poor diversification

The 3 months correlation between Dimensional and Global is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Global Value and Global X Hydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Hydrogen and Dimensional Global 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 Dimensional Global Value 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 Hydrogen has no effect on the direction of Dimensional Global i.e., Dimensional Global and Global X go up and down completely randomly.

Pair Corralation between Dimensional Global and Global X

Assuming the 90 days trading horizon Dimensional Global is expected to generate 2.82 times less return on investment than Global X. But when comparing it to its historical volatility, Dimensional Global Value is 4.42 times less risky than Global X. It trades about 0.21 of its potential returns per unit of risk. Global X Hydrogen is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  419.00  in Global X Hydrogen on October 24, 2024 and sell it today you would earn a total of  87.00  from holding Global X Hydrogen or generate 20.76% return on investment over 90 days.

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

Dimensional Global Value  vs.  Global X Hydrogen

Dimensional Global Value

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Global Value are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dimensional Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Global X Hydrogen

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Hydrogen are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Global X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dimensional Global and Global X

The main advantage of trading using opposite Dimensional Global and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Global 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 Dimensional Global Value and Global X Hydrogen 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.