Correlation Between Freedom 100 and Global X

Can any of the company-specific risk be diversified away by investing in both Freedom 100 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 Freedom 100 and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Freedom 100 Emerging and Global X MSCI, you can compare the effects of market volatilities on Freedom 100 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 Freedom 100 with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom 100 and Global X.

Diversification Opportunities for Freedom 100 and Global X

0.8

Correlation Coefficient

Freedom 100  Global X

Very poor diversification

The 3 months correlation between Freedom and Global is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Freedom 100 Emerging and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and Freedom 100 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 Freedom 100 Emerging 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 MSCI has no effect on the direction of Freedom 100 i.e., Freedom 100 and Global X go up and down completely randomly.

Pair Corralation between Freedom 100 and Global X

Given the investment horizon of 90 days Freedom 100 is expected to generate 1.61 times less return on investment than Global X. In addition to that, Freedom 100 is 1.42 times more volatile than Global X MSCI. It trades about 0.13 of its total potential returns per unit of risk. Global X MSCI is currently generating about 0.3 per unit of volatility. If you would invest  1,382  in Global X MSCI on December 28, 2024 and sell it today you would earn a total of  224.00  from holding Global X MSCI or generate 16.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Freedom 100 Emerging  vs.  Global X MSCI

Freedom 100 Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom 100 Emerging are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Freedom 100 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Global X MSCI

Risk-Adjusted Performance

Solid

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

Pair Trading with Freedom 100 and Global X

The main advantage of trading using opposite Freedom 100 and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom 100 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 Freedom 100 Emerging and Global X MSCI 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.