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 Seasonal, 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

0.82

Correlation Coefficient

Purpose Tactical  Global X

Very poor diversification

The 3 months correlation between Purpose and Global is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Tactical Hedged and Global X Seasonal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Seasonal 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 Seasonal 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 under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, Purpose Tactical Hedged is 1.07 times less risky than Global X. The etf trades about -0.11 of its potential returns per unit of risk. The Global X Seasonal is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,085  in Global X Seasonal on December 30, 2024 and sell it today you would lose (14.00) from holding Global X Seasonal or give up 0.45% of portfolio value over 90 days.

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

Purpose Tactical Hedged  vs.  Global X Seasonal

Purpose Tactical Hedged

Risk-Adjusted Performance

Very Weak

Over the last 90 days Purpose Tactical Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Purpose Tactical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Global X Seasonal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Seasonal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, 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 Seasonal 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.