Correlation Between Global X and Harvest Microsoft

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

By analyzing existing cross correlation between Global X Seasonal and Harvest Microsoft Enhanced, you can compare the effects of market volatilities on Global X and Harvest Microsoft 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 Harvest Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Harvest Microsoft.

Diversification Opportunities for Global X and Harvest Microsoft

0.76

Correlation Coefficient

Global X  Harvest Microsoft

Poor diversification

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

Pair Corralation between Global X and Harvest Microsoft

Assuming the 90 days trading horizon Global X is expected to generate 3.2 times less return on investment than Harvest Microsoft. But when comparing it to its historical volatility, Global X Seasonal is 2.45 times less risky than Harvest Microsoft. It trades about 0.09 of its potential returns per unit of risk. Harvest Microsoft Enhanced is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,165  in Harvest Microsoft Enhanced on September 12, 2024 and sell it today you would earn a total of  111.00  from holding Harvest Microsoft Enhanced or generate 9.53% return on investment over 90 days.

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

Global X Seasonal  vs.  Harvest Microsoft Enhanced

Global X Seasonal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Seasonal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Harvest Microsoft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Microsoft Enhanced are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Harvest Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and Harvest Microsoft

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

The idea behind Global X Seasonal and Harvest Microsoft Enhanced 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.