Correlation Between Global X and Manager Directed

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

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

Diversification Opportunities for Global X and Manager Directed

0.91

Correlation Coefficient

Global X  Manager Directed

Almost no diversification

The 3 months correlation between Global and Manager is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Global X NASDAQ and Manager Directed Portfolios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manager Directed Por 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 NASDAQ are associated (or correlated) with Manager Directed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manager Directed Por has no effect on the direction of Global X i.e., Global X and Manager Directed go up and down completely randomly.

Pair Corralation between Global X and Manager Directed

Given the investment horizon of 90 days Global X NASDAQ is expected to generate 12.19 times more return on investment than Manager Directed. However, Global X is 12.19 times more volatile than Manager Directed Portfolios. It trades about 0.21 of its potential returns per unit of risk. Manager Directed Portfolios is currently generating about 0.41 per unit of risk. If you would invest  1,675  in Global X NASDAQ on October 6, 2024 and sell it today you would earn a total of  78.00  from holding Global X NASDAQ or generate 4.66% return on investment over 90 days.

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

Global X NASDAQ  vs.  Manager Directed Portfolios

Global X NASDAQ

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X NASDAQ are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Manager Directed Por

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Manager Directed Portfolios are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Manager Directed is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Global X and Manager Directed

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

The idea behind Global X NASDAQ and Manager Directed Portfolios 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.