Correlation Between FT Cboe and Global X

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

By analyzing existing cross correlation between FT Cboe Vest and Global X NASDAQ, you can compare the effects of market volatilities on FT Cboe and Global X 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 FT Cboe with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and Global X.

Diversification Opportunities for FT Cboe and Global X

0.11

Correlation Coefficient

FT Cboe  Global X

Average diversification

The 3 months correlation between KNG and Global is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and Global X NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ and FT Cboe 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 FT Cboe Vest are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X NASDAQ has no effect on the direction of FT Cboe i.e., FT Cboe and Global X go up and down completely randomly.

Pair Corralation between FT Cboe and Global X

Considering the 90-day investment horizon FT Cboe Vest is expected to generate 1.32 times more return on investment than Global X. However, FT Cboe is 1.32 times more volatile than Global X NASDAQ. It trades about 0.01 of its potential returns per unit of risk. Global X NASDAQ is currently generating about -0.03 per unit of risk. If you would invest  5,008  in FT Cboe Vest on December 26, 2024 and sell it today you would earn a total of  15.00  from holding FT Cboe Vest or generate 0.3% return on investment over 90 days.

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

FT Cboe Vest  vs.  Global X NASDAQ

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FT Cboe is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Global X NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Global X is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with FT Cboe and Global X

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

The idea behind FT Cboe Vest and Global X NASDAQ 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.