Correlation Between FT AlphaDEX and Global X
Can any of the company-specific risk be diversified away by investing in both FT AlphaDEX 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 FT AlphaDEX and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT AlphaDEX Industrials and Global X Marijuana, you can compare the effects of market volatilities on FT AlphaDEX 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 FT AlphaDEX with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT AlphaDEX and Global X.
Diversification Opportunities for FT AlphaDEX and Global X
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FHG and Global is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and Global X Marijuana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Marijuana and FT AlphaDEX 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 FT AlphaDEX Industrials 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 Marijuana has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and Global X go up and down completely randomly.
Pair Corralation between FT AlphaDEX and Global X
Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to generate 0.68 times more return on investment than Global X. However, FT AlphaDEX Industrials is 1.47 times less risky than Global X. It trades about 0.03 of its potential returns per unit of risk. Global X Marijuana is currently generating about -0.06 per unit of risk. If you would invest 5,935 in FT AlphaDEX Industrials on September 15, 2024 and sell it today you would earn a total of 31.00 from holding FT AlphaDEX Industrials or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT AlphaDEX Industrials vs. Global X Marijuana
Performance |
| Timeline |
| FT AlphaDEX Industrials |
| Global X Marijuana |
FT AlphaDEX and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT AlphaDEX and Global X
The main advantage of trading using opposite FT AlphaDEX and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT AlphaDEX 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.| FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. BMO SPTSX Equal | FT AlphaDEX vs. First Trust Senior |
| Global X vs. First Trust AlphaDEX | Global X vs. FT AlphaDEX Industrials | Global X vs. BMO SPTSX Equal | Global X vs. First Trust Senior |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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