Correlation Between Purpose Tactical and Global X

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

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

Diversification Opportunities for Purpose Tactical and Global X

0.55

Correlation Coefficient

Purpose Tactical  Global X

Very weak diversification

The 3 months correlation between Purpose and Global is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Tactical Hedged and Global X Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Active and Purpose Tactical 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 Purpose Tactical Hedged 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 Active has no effect on the direction of Purpose Tactical i.e., Purpose Tactical and Global X go up and down completely randomly.

Pair Corralation between Purpose Tactical and Global X

Assuming the 90 days trading horizon Purpose Tactical Hedged is expected to generate 1.1 times more return on investment than Global X. However, Purpose Tactical is 1.1 times more volatile than Global X Active. It trades about 0.19 of its potential returns per unit of risk. Global X Active is currently generating about 0.13 per unit of risk. If you would invest  3,490  in Purpose Tactical Hedged on September 3, 2024 and sell it today you would earn a total of  192.00  from holding Purpose Tactical Hedged or generate 5.5% return on investment over 90 days.

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

Purpose Tactical Hedged  vs.  Global X Active

Purpose Tactical Hedged

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Tactical Hedged are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Purpose Tactical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Global X Active

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Purpose Tactical and Global X

The main advantage of trading using opposite Purpose Tactical and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Purpose Tactical 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 Purpose Tactical Hedged and Global X Active 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.