Correlation Between Global X and Energy Income

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

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

Diversification Opportunities for Global X and Energy Income

-0.42

Correlation Coefficient

Global X  Energy Income

Very good diversification

The 3 months correlation between Global and Energy is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active and Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Income 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 Active are associated (or correlated) with Energy Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Income has no effect on the direction of Global X i.e., Global X and Energy Income go up and down completely randomly.

Pair Corralation between Global X and Energy Income

Assuming the 90 days trading horizon Global X Active is expected to generate 0.26 times more return on investment than Energy Income. However, Global X Active is 3.9 times less risky than Energy Income. It trades about 0.08 of its potential returns per unit of risk. Energy Income is currently generating about -0.05 per unit of risk. If you would invest  894.00  in Global X Active on October 9, 2024 and sell it today you would earn a total of  17.00  from holding Global X Active or generate 1.9% return on investment over 90 days.

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

Global X Active  vs.  Energy Income

Global X Active

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active 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.

Energy Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Energy Income 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 Energy Income

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

The idea behind Global X Active and Energy Income 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.