Correlation Between Global X and VanEck Semiconductor

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

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

Diversification Opportunities for Global X and VanEck Semiconductor

0.48

Correlation Coefficient

Global X  VanEck Semiconductor

Very weak diversification

The 3 months correlation between Global and VanEck is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Global X Lithium and VanEck Semiconductor ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Semiconductor ETF 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 Lithium are associated (or correlated) with VanEck Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Semiconductor ETF has no effect on the direction of Global X i.e., Global X and VanEck Semiconductor go up and down completely randomly.

Pair Corralation between Global X and VanEck Semiconductor

Considering the 90-day investment horizon Global X Lithium is expected to generate 0.53 times more return on investment than VanEck Semiconductor. However, Global X Lithium is 1.87 times less risky than VanEck Semiconductor. It trades about -0.04 of its potential returns per unit of risk. VanEck Semiconductor ETF is currently generating about -0.06 per unit of risk. If you would invest  4,222  in Global X Lithium on December 25, 2024 and sell it today you would lose (142.00) from holding Global X Lithium or give up 3.36% of portfolio value over 90 days.

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

Global X Lithium  vs.  VanEck Semiconductor ETF

Global X Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Global X is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Semiconductor ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Global X and VanEck Semiconductor

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

The idea behind Global X Lithium and VanEck Semiconductor ETF 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.