Correlation Between Global X and Chatham Rock

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

Diversification Opportunities for Global X and Chatham Rock

-0.13

Correlation Coefficient

Global X  Chatham Rock

Good diversification

The 3 months correlation between Global and Chatham is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active and Chatham Rock Phosphate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Rock Phosphate 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 Chatham Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Rock Phosphate has no effect on the direction of Global X i.e., Global X and Chatham Rock go up and down completely randomly.

Pair Corralation between Global X and Chatham Rock

Assuming the 90 days trading horizon Global X is expected to generate 25.91 times less return on investment than Chatham Rock. But when comparing it to its historical volatility, Global X Active is 22.56 times less risky than Chatham Rock. It trades about 0.14 of its potential returns per unit of risk. Chatham Rock Phosphate is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Chatham Rock Phosphate on August 31, 2024 and sell it today you would earn a total of  2.00  from holding Chatham Rock Phosphate or generate 28.57% return on investment over 90 days.

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

Global X Active  vs.  Chatham Rock Phosphate

Global X Active

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Chatham Rock Phosphate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chatham Rock Phosphate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chatham Rock showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Chatham Rock

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

The idea behind Global X Active and Chatham Rock Phosphate 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 Stocks Directory module to find actively traded stocks across global markets.