Correlation Between Global X and Principal

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

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

Diversification Opportunities for Global X and Principal

0.24

Correlation Coefficient

Global X  Principal

Modest diversification

The 3 months correlation between Global and Principal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Global X Millennials and Principal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal 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 Millennials are associated (or correlated) with Principal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal has no effect on the direction of Global X i.e., Global X and Principal go up and down completely randomly.

Pair Corralation between Global X and Principal

Given the investment horizon of 90 days Global X Millennials is expected to generate 0.86 times more return on investment than Principal. However, Global X Millennials is 1.17 times less risky than Principal. It trades about 0.08 of its potential returns per unit of risk. Principal is currently generating about -0.03 per unit of risk. If you would invest  3,123  in Global X Millennials on October 24, 2024 and sell it today you would earn a total of  1,511  from holding Global X Millennials or generate 48.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.09%
Values	Daily Returns

Global X Millennials  vs.  Principal

Global X Millennials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Millennials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting essential indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Principal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Principal is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and Principal

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

The idea behind Global X Millennials and Principal 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.