Correlation Between Tech Leaders and Global X

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

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

Diversification Opportunities for Tech Leaders and Global X

0.36

Correlation Coefficient

Tech Leaders  Global X

Weak diversification

The 3 months correlation between Tech and Global is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Tech Leaders Income and Global X Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Gold and Tech Leaders 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 Tech Leaders Income 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 Gold has no effect on the direction of Tech Leaders i.e., Tech Leaders and Global X go up and down completely randomly.

Pair Corralation between Tech Leaders and Global X

Assuming the 90 days trading horizon Tech Leaders Income is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, Tech Leaders Income is 1.49 times less risky than Global X. The etf trades about -0.01 of its potential returns per unit of risk. The Global X Gold is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,694  in Global X Gold on November 29, 2024 and sell it today you would earn a total of  375.00  from holding Global X Gold or generate 13.92% return on investment over 90 days.

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

Tech Leaders Income  vs.  Global X Gold

Tech Leaders Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tech Leaders Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Tech Leaders is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Global X Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Gold are ranked lower than 10 (%) 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 Tech Leaders and Global X

The main advantage of trading using opposite Tech Leaders and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tech Leaders 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 Tech Leaders Income and Global X Gold 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.