Correlation Between Ecofin Global and Global X

Can any of the company-specific risk be diversified away by investing in both Ecofin 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 Ecofin 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 Ecofin Global Water and Global X Renewable, you can compare the effects of market volatilities on Ecofin 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 Ecofin Global with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofin Global and Global X.

Diversification Opportunities for Ecofin Global and Global X

0.04

Correlation Coefficient

Ecofin Global  Global X

Significant diversification

The 3 months correlation between Ecofin and Global is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ecofin Global Water and Global X Renewable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Renewable and Ecofin 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 Ecofin Global Water 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 Renewable has no effect on the direction of Ecofin Global i.e., Ecofin Global and Global X go up and down completely randomly.

Pair Corralation between Ecofin Global and Global X

Given the investment horizon of 90 days Ecofin Global Water is expected to generate 0.72 times more return on investment than Global X. However, Ecofin Global Water is 1.39 times less risky than Global X. It trades about 0.06 of its potential returns per unit of risk. Global X Renewable is currently generating about -0.04 per unit of risk. If you would invest  4,703  in Ecofin Global Water on December 28, 2024 and sell it today you would earn a total of  115.00  from holding Ecofin Global Water or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

Ecofin Global Water  vs.  Global X Renewable

Ecofin Global Water

Risk-Adjusted Performance

Insignificant

Over the last 90 days Ecofin Global Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Ecofin Global is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Global X Renewable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Renewable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ecofin Global and Global X

The main advantage of trading using opposite Ecofin Global and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecofin 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 Ecofin Global Water and Global X Renewable 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.