Correlation Between Globe Trade and ADX

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

By analyzing existing cross correlation between Globe Trade Centre and ADX, you can compare the effects of market volatilities on Globe Trade and ADX 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 Globe Trade with a short position of ADX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Trade and ADX.

Diversification Opportunities for Globe Trade and ADX

0.32

Correlation Coefficient

Globe Trade  ADX

Weak diversification

The 3 months correlation between Globe and ADX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Globe Trade Centre and ADX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX and Globe Trade 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 Globe Trade Centre are associated (or correlated) with ADX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADX has no effect on the direction of Globe Trade i.e., Globe Trade and ADX go up and down completely randomly.

Pair Corralation between Globe Trade and ADX

Assuming the 90 days trading horizon Globe Trade is expected to generate 1.13 times less return on investment than ADX. But when comparing it to its historical volatility, Globe Trade Centre is 4.37 times less risky than ADX. It trades about 0.11 of its potential returns per unit of risk. ADX is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  30.00  in ADX on December 21, 2024 and sell it today you would earn a total of  0.00  from holding ADX or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.1%
Values	Daily Returns

Globe Trade Centre  vs.  ADX

Globe Trade Centre

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Globe Trade Centre are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Globe Trade may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ADX

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ADX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Globe Trade and ADX

The main advantage of trading using opposite Globe Trade and ADX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globe Trade position performs unexpectedly, ADX 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 ADX will offset losses from the drop in ADX's long position.

The idea behind Globe Trade Centre and ADX 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 Global Correlations module to find global opportunities by holding instruments from different markets.