Correlation Between Global X and AdvisorShares STAR

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

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

Diversification Opportunities for Global X and AdvisorShares STAR

0.81

Correlation Coefficient

Global X  AdvisorShares STAR

Very poor diversification

The 3 months correlation between Global and AdvisorShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global X Russell and AdvisorShares STAR Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares STAR Global 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 Russell are associated (or correlated) with AdvisorShares STAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares STAR Global has no effect on the direction of Global X i.e., Global X and AdvisorShares STAR go up and down completely randomly.

Pair Corralation between Global X and AdvisorShares STAR

Given the investment horizon of 90 days Global X Russell is expected to generate 1.46 times more return on investment than AdvisorShares STAR. However, Global X is 1.46 times more volatile than AdvisorShares STAR Global. It trades about -0.1 of its potential returns per unit of risk. AdvisorShares STAR Global is currently generating about -0.16 per unit of risk. If you would invest  1,670  in Global X Russell on September 25, 2024 and sell it today you would lose (25.00) from holding Global X Russell or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Global X Russell  vs.  AdvisorShares STAR Global

Global X Russell

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Russell are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AdvisorShares STAR Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvisorShares STAR Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, AdvisorShares STAR is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and AdvisorShares STAR

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

The idea behind Global X Russell and AdvisorShares STAR Global 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.