Correlation Between Global X and Dimensional Australia

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

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

Diversification Opportunities for Global X and Dimensional Australia

0.43

Correlation Coefficient

Global X  Dimensional Australia

Very weak diversification

The 3 months correlation between Global and Dimensional is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Global X Hydrogen and Dimensional Australia Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Australia 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 Hydrogen are associated (or correlated) with Dimensional Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Australia has no effect on the direction of Global X i.e., Global X and Dimensional Australia go up and down completely randomly.

Pair Corralation between Global X and Dimensional Australia

Assuming the 90 days trading horizon Global X Hydrogen is expected to under-perform the Dimensional Australia. In addition to that, Global X is 2.67 times more volatile than Dimensional Australia Core. It trades about -0.03 of its total potential returns per unit of risk. Dimensional Australia Core is currently generating about 0.06 per unit of volatility. If you would invest  1,384  in Dimensional Australia Core on October 10, 2024 and sell it today you would earn a total of  291.00  from holding Dimensional Australia Core or generate 21.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Global X Hydrogen  vs.  Dimensional Australia Core

Global X Hydrogen

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Hydrogen are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Global X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dimensional Australia

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Australia Core are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dimensional Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Global X and Dimensional Australia

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

The idea behind Global X Hydrogen and Dimensional Australia Core 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.