Correlation Between Global X and VanEck Oil

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

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

Diversification Opportunities for Global X and VanEck Oil

0.78

Correlation Coefficient

Global X  VanEck Oil

Poor diversification

The 3 months correlation between Global and VanEck is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Global X MLP and VanEck Oil Refiners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Refiners 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 MLP are associated (or correlated) with VanEck Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Oil Refiners has no effect on the direction of Global X i.e., Global X and VanEck Oil go up and down completely randomly.

Pair Corralation between Global X and VanEck Oil

Given the investment horizon of 90 days Global X MLP is expected to generate 1.03 times more return on investment than VanEck Oil. However, Global X is 1.03 times more volatile than VanEck Oil Refiners. It trades about 0.17 of its potential returns per unit of risk. VanEck Oil Refiners is currently generating about 0.12 per unit of risk. If you would invest  4,834  in Global X MLP on December 26, 2024 and sell it today you would earn a total of  509.00  from holding Global X MLP or generate 10.53% return on investment over 90 days.

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

Global X MLP  vs.  VanEck Oil Refiners

Global X MLP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MLP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

VanEck Oil Refiners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Oil Refiners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, VanEck Oil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global X and VanEck Oil

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

The idea behind Global X MLP and VanEck Oil Refiners 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.