Correlation Between Principal Exchange and Global X

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

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

Diversification Opportunities for Principal Exchange and Global X

0.81

Correlation Coefficient

Principal Exchange  Global X

Very poor diversification

The 3 months correlation between Principal and Global is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Principal Exchange Traded Fund and Global X Variable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Variable and Principal Exchange 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 Principal Exchange Traded Funds 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 Variable has no effect on the direction of Principal Exchange i.e., Principal Exchange and Global X go up and down completely randomly.

Pair Corralation between Principal Exchange and Global X

Given the investment horizon of 90 days Principal Exchange Traded Funds is expected to generate 0.49 times more return on investment than Global X. However, Principal Exchange Traded Funds is 2.06 times less risky than Global X. It trades about 0.12 of its potential returns per unit of risk. Global X Variable is currently generating about 0.04 per unit of risk. If you would invest  1,881  in Principal Exchange Traded Funds on December 30, 2024 and sell it today you would earn a total of  25.00  from holding Principal Exchange Traded Funds or generate 1.33% return on investment over 90 days.

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

Principal Exchange Traded Fund  vs.  Global X Variable

Principal Exchange

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Exchange Traded Funds are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Principal Exchange is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Global X Variable

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Variable are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Global X is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Principal Exchange and Global X

The main advantage of trading using opposite Principal Exchange and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Exchange 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 Principal Exchange Traded Funds and Global X Variable 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 Stocks Directory module to find actively traded stocks across global markets.