Correlation Between Global X and FlexShares STOXX

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

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

Diversification Opportunities for Global X and FlexShares STOXX

-0.22

Correlation Coefficient

Global X  FlexShares STOXX

Very good diversification

The 3 months correlation between Global and FlexShares is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Global X Infrastructure and FlexShares STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares STOXX Global 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 Infrastructure are associated (or correlated) with FlexShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares STOXX Global has no effect on the direction of Global X i.e., Global X and FlexShares STOXX go up and down completely randomly.

Pair Corralation between Global X and FlexShares STOXX

Given the investment horizon of 90 days Global X Infrastructure is expected to generate 2.3 times more return on investment than FlexShares STOXX. However, Global X is 2.3 times more volatile than FlexShares STOXX Global. It trades about 0.26 of its potential returns per unit of risk. FlexShares STOXX Global is currently generating about 0.03 per unit of risk. If you would invest  3,735  in Global X Infrastructure on September 5, 2024 and sell it today you would earn a total of  801.00  from holding Global X Infrastructure or generate 21.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Global X Infrastructure  vs.  FlexShares STOXX Global

Global X Infrastructure

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Infrastructure are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Global X exhibited solid returns over the last few months and may actually be approaching a breakup point.

FlexShares STOXX Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares STOXX Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, FlexShares STOXX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and FlexShares STOXX

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

The idea behind Global X Infrastructure and FlexShares STOXX Global 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.