Correlation Between Defiance ETFs and Global X

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

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

Diversification Opportunities for Defiance ETFs and Global X

0.87

Correlation Coefficient

Defiance ETFs  Global X

Very poor diversification

The 3 months correlation between Defiance and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Defiance ETFs and Global X FinTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X FinTech and Defiance ETFs 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 Defiance ETFs 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 FinTech has no effect on the direction of Defiance ETFs i.e., Defiance ETFs and Global X go up and down completely randomly.

Pair Corralation between Defiance ETFs and Global X

Given the investment horizon of 90 days Defiance ETFs is expected to generate 1.47 times less return on investment than Global X. But when comparing it to its historical volatility, Defiance ETFs is 1.3 times less risky than Global X. It trades about 0.07 of its potential returns per unit of risk. Global X FinTech is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,028  in Global X FinTech on September 3, 2024 and sell it today you would earn a total of  1,372  from holding Global X FinTech or generate 67.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	81.21%
Values	Daily Returns

Defiance ETFs  vs.  Global X FinTech

Defiance ETFs

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global X FinTech

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X FinTech are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Global X showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Defiance ETFs and Global X

The main advantage of trading using opposite Defiance ETFs and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defiance ETFs 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 Defiance ETFs and Global X FinTech 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 Transaction History module to view history of all your transactions and understand their impact on performance.