Correlation Between Communication Services and Global X

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

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

Diversification Opportunities for Communication Services and Global X

0.62

Correlation Coefficient

Communication Services  Global X

Poor diversification

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

Pair Corralation between Communication Services and Global X

Considering the 90-day investment horizon Communication Services Select is expected to generate 0.81 times more return on investment than Global X. However, Communication Services Select is 1.23 times less risky than Global X. It trades about -0.03 of its potential returns per unit of risk. Global X Video is currently generating about -0.27 per unit of risk. If you would invest  9,852  in Communication Services Select on October 10, 2024 and sell it today you would lose (68.00) from holding Communication Services Select or give up 0.69% of portfolio value over 90 days.

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

Communication Services Select  vs.  Global X Video

Communication Services

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Communication Services Select are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Communication Services may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Global X Video

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Video are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Communication Services and Global X

The main advantage of trading using opposite Communication Services and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Communication Services 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 Communication Services Select and Global X Video 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.