Correlation Between Global X and Communication Services

Can any of the company-specific risk be diversified away by investing in both Global X and Communication Services 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 Communication Services 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 Communication Services Select, you can compare the effects of market volatilities on Global X and Communication Services 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 Communication Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Communication Services.

Diversification Opportunities for Global X and Communication Services

0.76

Correlation Coefficient

Global X  Communication Services

Poor diversification

The 3 months correlation between Global and Communication is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Global X Thematic and Communication Services Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Communication Services 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 Communication Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Communication Services has no effect on the direction of Global X i.e., Global X and Communication Services go up and down completely randomly.

Pair Corralation between Global X and Communication Services

Given the investment horizon of 90 days Global X is expected to generate 107.5 times less return on investment than Communication Services. In addition to that, Global X is 1.07 times more volatile than Communication Services Select. It trades about 0.0 of its total potential returns per unit of risk. Communication Services Select is currently generating about 0.04 per unit of volatility. If you would invest  9,684  in Communication Services Select on December 28, 2024 and sell it today you would earn a total of  225.00  from holding Communication Services Select or generate 2.32% return on investment over 90 days.

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

Global X Thematic  vs.  Communication Services Select

Global X Thematic

Risk-Adjusted Performance

Very Weak

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

Communication Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Communication Services Select are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Communication Services is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Global X and Communication Services

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

The idea behind Global X Thematic and Communication Services Select 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.