Correlation Between Global X and Freedom Day

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

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

Diversification Opportunities for Global X and Freedom Day

0.35

Correlation Coefficient

Global X  Freedom Day

Weak diversification

The 3 months correlation between Global and Freedom is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Global X Dow and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend and Global X 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 Global X Dow are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of Global X i.e., Global X and Freedom Day go up and down completely randomly.

Pair Corralation between Global X and Freedom Day

Given the investment horizon of 90 days Global X Dow is expected to generate 0.62 times more return on investment than Freedom Day. However, Global X Dow is 1.61 times less risky than Freedom Day. It trades about -0.03 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about -0.18 per unit of risk. If you would invest  2,255  in Global X Dow on October 10, 2024 and sell it today you would lose (9.00) from holding Global X Dow or give up 0.4% of portfolio value over 90 days.

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

Global X Dow  vs.  Freedom Day Dividend

Global X Dow

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Dow are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Global X is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Freedom Day Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freedom Day Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and Freedom Day

The main advantage of trading using opposite Global X and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Freedom Day 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 Freedom Day will offset losses from the drop in Freedom Day's long position.

The idea behind Global X Dow and Freedom Day Dividend 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.