Correlation Between LHA Market and Global X

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

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

Diversification Opportunities for LHA Market and Global X

-0.53

Correlation Coefficient

LHA Market  Global X

Excellent diversification

The 3 months correlation between LHA and Global is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding LHA Market State and Global X Adaptive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Adaptive and LHA Market 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 LHA Market State 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 Adaptive has no effect on the direction of LHA Market i.e., LHA Market and Global X go up and down completely randomly.

Pair Corralation between LHA Market and Global X

Given the investment horizon of 90 days LHA Market State is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, LHA Market State is 1.54 times less risky than Global X. The etf trades about -0.07 of its potential returns per unit of risk. The Global X Adaptive is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,268  in Global X Adaptive on September 5, 2024 and sell it today you would earn a total of  366.63  from holding Global X Adaptive or generate 11.22% return on investment over 90 days.

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

LHA Market State  vs.  Global X Adaptive

LHA Market State

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global X Adaptive

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Adaptive are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LHA Market and Global X

The main advantage of trading using opposite LHA Market and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LHA Market 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 LHA Market State and Global X Adaptive 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.