Correlation Between Global X and X Square

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

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

Diversification Opportunities for Global X and X Square

-0.43

Correlation Coefficient

Global X  X Square

Very good diversification

The 3 months correlation between Global and SQBIX is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and X Square Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Square Balanced 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 Funds are associated (or correlated) with X Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Square Balanced has no effect on the direction of Global X i.e., Global X and X Square go up and down completely randomly.

Pair Corralation between Global X and X Square

Given the investment horizon of 90 days Global X Funds is expected to generate 2.13 times more return on investment than X Square. However, Global X is 2.13 times more volatile than X Square Balanced. It trades about 0.25 of its potential returns per unit of risk. X Square Balanced is currently generating about -0.01 per unit of risk. If you would invest  3,747  in Global X Funds on December 28, 2024 and sell it today you would earn a total of  906.00  from holding Global X Funds or generate 24.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Global X Funds  vs.  X Square Balanced

Global X Funds

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Global X exhibited solid returns over the last few months and may actually be approaching a breakup point.

X Square Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days X Square Balanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, X Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and X Square

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

The idea behind Global X Funds and X Square Balanced 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.