Correlation Between SMI 3Fourteen and Global X

Can any of the company-specific risk be diversified away by investing in both SMI 3Fourteen 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 SMI 3Fourteen and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SMI 3Fourteen Full Cycle and Global X NASDAQ, you can compare the effects of market volatilities on SMI 3Fourteen 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 SMI 3Fourteen with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMI 3Fourteen and Global X.

Diversification Opportunities for SMI 3Fourteen and Global X

0.7

Correlation Coefficient

SMI 3Fourteen  Global X

Poor diversification

The 3 months correlation between SMI and Global is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SMI 3Fourteen Full Cycle and Global X NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ and SMI 3Fourteen 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 SMI 3Fourteen Full Cycle 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 NASDAQ has no effect on the direction of SMI 3Fourteen i.e., SMI 3Fourteen and Global X go up and down completely randomly.

Pair Corralation between SMI 3Fourteen and Global X

Given the investment horizon of 90 days SMI 3Fourteen Full Cycle is expected to under-perform the Global X. In addition to that, SMI 3Fourteen is 1.71 times more volatile than Global X NASDAQ. It trades about -0.05 of its total potential returns per unit of risk. Global X NASDAQ is currently generating about -0.06 per unit of volatility. If you would invest  1,716  in Global X NASDAQ on December 24, 2024 and sell it today you would lose (35.00) from holding Global X NASDAQ or give up 2.04% of portfolio value over 90 days.

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

SMI 3Fourteen Full Cycle  vs.  Global X NASDAQ

SMI 3Fourteen Full

Risk-Adjusted Performance

Very Weak

Over the last 90 days SMI 3Fourteen Full Cycle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SMI 3Fourteen is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Global X NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Global X is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SMI 3Fourteen and Global X

The main advantage of trading using opposite SMI 3Fourteen and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMI 3Fourteen 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 SMI 3Fourteen Full Cycle and Global X NASDAQ 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.