Correlation Between European Residential and Global X

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

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

Diversification Opportunities for European Residential and Global X

-0.14

Correlation Coefficient

European Residential  Global X

Good diversification

The 3 months correlation between European and Global is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Global X Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Cash and European Residential 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 European Residential Real 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 Cash has no effect on the direction of European Residential i.e., European Residential and Global X go up and down completely randomly.

Pair Corralation between European Residential and Global X

Assuming the 90 days trading horizon European Residential Real is expected to under-perform the Global X. In addition to that, European Residential is 141.45 times more volatile than Global X Cash. It trades about -0.19 of its total potential returns per unit of risk. Global X Cash is currently generating about 0.56 per unit of volatility. If you would invest  11,386  in Global X Cash on October 13, 2024 and sell it today you would earn a total of  80.00  from holding Global X Cash or generate 0.7% return on investment over 90 days.

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

European Residential Real  vs.  Global X Cash

European Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Global X Cash

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Cash are ranked lower than 16 (%) 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 European Residential and Global X

The main advantage of trading using opposite European Residential and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential 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 European Residential Real and Global X Cash 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.