Correlation Between Main Thematic and Global X

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

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

Diversification Opportunities for Main Thematic and Global X

0.65

Correlation Coefficient

Main Thematic  Global X

Poor diversification

The 3 months correlation between Main and Global is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Main Thematic Innovation and Global X Thematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Thematic and Main Thematic 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 Main Thematic Innovation 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 Thematic has no effect on the direction of Main Thematic i.e., Main Thematic and Global X go up and down completely randomly.

Pair Corralation between Main Thematic and Global X

Given the investment horizon of 90 days Main Thematic Innovation is expected to under-perform the Global X. In addition to that, Main Thematic is 2.36 times more volatile than Global X Thematic. It trades about -0.08 of its total potential returns per unit of risk. Global X Thematic is currently generating about 0.0 per unit of volatility. If you would invest  2,360  in Global X Thematic on December 28, 2024 and sell it today you would lose (7.00) from holding Global X Thematic or give up 0.3% of portfolio value over 90 days.

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

Main Thematic Innovation  vs.  Global X Thematic

Main Thematic Innovation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Main Thematic Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Global X Thematic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Thematic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Main Thematic and Global X

The main advantage of trading using opposite Main Thematic and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Thematic 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 Main Thematic Innovation and Global X Thematic 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.