Correlation Between Desjardins and GLOBAL X

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

By analyzing existing cross correlation between Desjardins RI USA and GLOBAL X HIGH, you can compare the effects of market volatilities on Desjardins 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 Desjardins with a short position of GLOBAL X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desjardins and GLOBAL X.

Diversification Opportunities for Desjardins and GLOBAL X

0.97

Correlation Coefficient

Desjardins  GLOBAL X

Almost no diversification

The 3 months correlation between Desjardins and GLOBAL is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI USA and GLOBAL X HIGH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBAL X HIGH and Desjardins 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 Desjardins RI USA 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 HIGH has no effect on the direction of Desjardins i.e., Desjardins and GLOBAL X go up and down completely randomly.

Pair Corralation between Desjardins and GLOBAL X

Assuming the 90 days trading horizon Desjardins RI USA is expected to generate 40.25 times more return on investment than GLOBAL X. However, Desjardins is 40.25 times more volatile than GLOBAL X HIGH. It trades about 0.14 of its potential returns per unit of risk. GLOBAL X HIGH is currently generating about 0.65 per unit of risk. If you would invest  4,448  in Desjardins RI USA on September 22, 2024 and sell it today you would earn a total of  104.00  from holding Desjardins RI USA or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Desjardins RI USA  vs.  GLOBAL X HIGH

Desjardins RI USA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI USA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GLOBAL X HIGH

Risk-Adjusted Performance

59 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in GLOBAL X HIGH are ranked lower than 59 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, GLOBAL X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Desjardins and GLOBAL X

The main advantage of trading using opposite Desjardins and GLOBAL X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desjardins 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 Desjardins RI USA and GLOBAL X HIGH 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.