Correlation Between Global X and Defiance Next

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

Diversification Opportunities for Global X and Defiance Next

0.92

Correlation Coefficient

Global X  Defiance Next

Almost no diversification

The 3 months correlation between Global and Defiance is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Global X Hydrogen and Defiance Next Gen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Next Gen 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 Defiance Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Next Gen has no effect on the direction of Global X i.e., Global X and Defiance Next go up and down completely randomly.

Pair Corralation between Global X and Defiance Next

Given the investment horizon of 90 days Global X Hydrogen is expected to generate 1.1 times more return on investment than Defiance Next. However, Global X is 1.1 times more volatile than Defiance Next Gen. It trades about 0.06 of its potential returns per unit of risk. Defiance Next Gen is currently generating about 0.04 per unit of risk. If you would invest  2,320  in Global X Hydrogen on September 4, 2024 and sell it today you would earn a total of  198.00  from holding Global X Hydrogen or generate 8.53% return on investment over 90 days.

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

Global X Hydrogen  vs.  Defiance Next Gen

Global X Hydrogen

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Hydrogen are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Defiance Next Gen

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Next Gen are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Defiance Next is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and Defiance Next

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

The idea behind Global X Hydrogen and Defiance Next Gen 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.