Correlation Between ETRACS Alerian and Global X
Can any of the company-specific risk be diversified away by investing in both ETRACS Alerian 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 ETRACS Alerian and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS Alerian Midstream and Global X MLP, you can compare the effects of market volatilities on ETRACS Alerian 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 ETRACS Alerian with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Alerian and Global X.
Diversification Opportunities for ETRACS Alerian and Global X
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between ETRACS and Global is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Alerian Midstream and Global X MLP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MLP and ETRACS Alerian 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 ETRACS Alerian Midstream 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 MLP has no effect on the direction of ETRACS Alerian i.e., ETRACS Alerian and Global X go up and down completely randomly.
Pair Corralation between ETRACS Alerian and Global X
Given the investment horizon of 90 days ETRACS Alerian Midstream is expected to generate 0.9 times more return on investment than Global X. However, ETRACS Alerian Midstream is 1.11 times less risky than Global X. It trades about 0.25 of its potential returns per unit of risk. Global X MLP is currently generating about 0.21 per unit of risk. If you would invest 3,904 in ETRACS Alerian Midstream on September 1, 2024 and sell it today you would earn a total of 1,748 from holding ETRACS Alerian Midstream or generate 44.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
ETRACS Alerian Midstream vs. Global X MLP
Performance |
| Timeline |
| ETRACS Alerian Midstream |
| Global X MLP |
ETRACS Alerian and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS Alerian and Global X
The main advantage of trading using opposite ETRACS Alerian and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS Alerian 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.| ETRACS Alerian vs. First Trust North | ETRACS Alerian vs. Global X MLP | ETRACS Alerian vs. Tortoise North American | ETRACS Alerian vs. UBS AG London |
| Global X vs. First Trust North | Global X vs. Global X MLP | Global X vs. Tortoise North American | Global X vs. UBS AG London |
Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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