Correlation Between Global X and Optica Rare

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

By analyzing existing cross correlation between Global X Disruptive and Optica Rare Earths, you can compare the effects of market volatilities on Global X and Optica Rare 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 Optica Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Optica Rare.

Diversification Opportunities for Global X and Optica Rare

-0.17

Correlation Coefficient

Global X  Optica Rare

Good diversification

The 3 months correlation between Global and Optica is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Global X Disruptive and Optica Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optica Rare Earths 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 Disruptive are associated (or correlated) with Optica Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optica Rare Earths has no effect on the direction of Global X i.e., Global X and Optica Rare go up and down completely randomly.

Pair Corralation between Global X and Optica Rare

Given the investment horizon of 90 days Global X Disruptive is expected to generate 0.89 times more return on investment than Optica Rare. However, Global X Disruptive is 1.12 times less risky than Optica Rare. It trades about 0.08 of its potential returns per unit of risk. Optica Rare Earths is currently generating about 0.02 per unit of risk. If you would invest  1,431  in Global X Disruptive on December 29, 2024 and sell it today you would earn a total of  88.00  from holding Global X Disruptive or generate 6.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Global X Disruptive  vs.  Optica Rare Earths

Global X Disruptive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Disruptive are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Optica Rare Earths

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Optica Rare Earths are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Optica Rare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Global X and Optica Rare

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

The idea behind Global X Disruptive and Optica Rare Earths 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.