Correlation Between Global X and High Yield

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

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

Diversification Opportunities for Global X and High Yield

0.23

Correlation Coefficient

Global X  High Yield

Modest diversification

The 3 months correlation between Global and High is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Global X Thematic and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and Global X 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 Global X Thematic are associated (or correlated) with High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of Global X i.e., Global X and High Yield go up and down completely randomly.

Pair Corralation between Global X and High Yield

Given the investment horizon of 90 days Global X Thematic is expected to generate 5.74 times more return on investment than High Yield. However, Global X is 5.74 times more volatile than High Yield Municipal Fund. It trades about 0.08 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.09 per unit of risk. If you would invest  2,465  in Global X Thematic on September 15, 2024 and sell it today you would earn a total of  43.00  from holding Global X Thematic or generate 1.74% return on investment over 90 days.

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

Global X Thematic  vs.  High Yield Municipal Fund

Global X Thematic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Thematic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and High Yield

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

The idea behind Global X Thematic and High Yield Municipal Fund 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.