Correlation Between Democracy International and Global X

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

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

Diversification Opportunities for Democracy International and Global X

0.73

Correlation Coefficient

Democracy International  Global X

Poor diversification

The 3 months correlation between Democracy and Global is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Democracy International and Global X Disruptive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Disruptive and Democracy International 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 Democracy International 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 Disruptive has no effect on the direction of Democracy International i.e., Democracy International and Global X go up and down completely randomly.

Pair Corralation between Democracy International and Global X

Given the investment horizon of 90 days Democracy International is expected to generate 0.35 times more return on investment than Global X. However, Democracy International is 2.86 times less risky than Global X. It trades about -0.15 of its potential returns per unit of risk. Global X Disruptive is currently generating about -0.11 per unit of risk. If you would invest  2,650  in Democracy International on October 8, 2024 and sell it today you would lose (165.00) from holding Democracy International or give up 6.23% of portfolio value over 90 days.

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

Democracy International  vs.  Global X Disruptive

Democracy International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Democracy International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Global X Disruptive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Disruptive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Democracy International and Global X

The main advantage of trading using opposite Democracy International and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Democracy International 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 Democracy International and Global X Disruptive 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.