Correlation Between TD Global and Global X

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

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

Diversification Opportunities for TD Global and Global X

-0.62

Correlation Coefficient

TD Global  Global X

Excellent diversification

The 3 months correlation between TEC and Global is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding TD Global Technology and Global X Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Europe and TD Global 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 TD Global Technology 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 Europe has no effect on the direction of TD Global i.e., TD Global and Global X go up and down completely randomly.

Pair Corralation between TD Global and Global X

Assuming the 90 days trading horizon TD Global Technology is expected to under-perform the Global X. In addition to that, TD Global is 1.42 times more volatile than Global X Europe. It trades about -0.13 of its total potential returns per unit of risk. Global X Europe is currently generating about 0.2 per unit of volatility. If you would invest  5,097  in Global X Europe on December 29, 2024 and sell it today you would earn a total of  684.00  from holding Global X Europe or generate 13.42% return on investment over 90 days.

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

TD Global Technology  vs.  Global X Europe

TD Global Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Global Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Global X Europe

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Europe are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TD Global and Global X

The main advantage of trading using opposite TD Global and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Global 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 TD Global Technology and Global X Europe 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 Transaction History module to view history of all your transactions and understand their impact on performance.