Correlation Between Global X and FT Cboe

Can any of the company-specific risk be diversified away by investing in both Global X and FT Cboe 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 FT Cboe 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 FT Cboe Vest, you can compare the effects of market volatilities on Global X and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and FT Cboe.

Diversification Opportunities for Global X and FT Cboe

0.62

Correlation Coefficient

Global X  FT Cboe

Poor diversification

The 3 months correlation between Global and KNG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Global X Nasdaq and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Global X i.e., Global X and FT Cboe go up and down completely randomly.

Pair Corralation between Global X and FT Cboe

Given the investment horizon of 90 days Global X Nasdaq is expected to generate 1.51 times more return on investment than FT Cboe. However, Global X is 1.51 times more volatile than FT Cboe Vest. It trades about 0.18 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.1 per unit of risk. If you would invest  3,026  in Global X Nasdaq on September 2, 2024 and sell it today you would earn a total of  264.00  from holding Global X Nasdaq or generate 8.72% return on investment over 90 days.

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

Global X Nasdaq  vs.  FT Cboe Vest

Global X Nasdaq

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Nasdaq are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FT Cboe Vest

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FT Cboe is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Global X and FT Cboe

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

The idea behind Global X Nasdaq and FT Cboe Vest 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.