Correlation Between FT AlphaDEX and Global X

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

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

Diversification Opportunities for FT AlphaDEX and Global X

0.89

Correlation Coefficient

FT AlphaDEX  Global X

Very poor diversification

The 3 months correlation between FHG and Global is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and Global X Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Industry and FT AlphaDEX 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 FT AlphaDEX Industrials 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 Industry has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and Global X go up and down completely randomly.

Pair Corralation between FT AlphaDEX and Global X

Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to generate 0.59 times more return on investment than Global X. However, FT AlphaDEX Industrials is 1.71 times less risky than Global X. It trades about -0.28 of its potential returns per unit of risk. Global X Industry is currently generating about -0.2 per unit of risk. If you would invest  5,995  in FT AlphaDEX Industrials on October 8, 2024 and sell it today you would lose (293.00) from holding FT AlphaDEX Industrials or give up 4.89% of portfolio value over 90 days.

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

FT AlphaDEX Industrials  vs.  Global X Industry

FT AlphaDEX Industrials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FT AlphaDEX Industrials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, FT AlphaDEX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Global X Industry

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Industry are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FT AlphaDEX and Global X

The main advantage of trading using opposite FT AlphaDEX and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT AlphaDEX 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 FT AlphaDEX Industrials and Global X Industry 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.