Correlation Between Global X and BetaPro Crude

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

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

Diversification Opportunities for Global X and BetaPro Crude

-0.43

Correlation Coefficient

Global X  BetaPro Crude

Very good diversification

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

Pair Corralation between Global X and BetaPro Crude

Assuming the 90 days trading horizon Global X Pipelines is expected to generate 0.25 times more return on investment than BetaPro Crude. However, Global X Pipelines is 4.07 times less risky than BetaPro Crude. It trades about 0.15 of its potential returns per unit of risk. BetaPro Crude Oil is currently generating about -0.02 per unit of risk. If you would invest  1,075  in Global X Pipelines on September 4, 2024 and sell it today you would earn a total of  105.00  from holding Global X Pipelines or generate 9.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Global X Pipelines  vs.  BetaPro Crude Oil

Global X Pipelines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Pipelines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BetaPro Crude Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro Crude Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Global X and BetaPro Crude

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

The idea behind Global X Pipelines and BetaPro Crude Oil 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.