Correlation Between Global X and First Trust
Can any of the company-specific risk be diversified away by investing in both Global X and First Trust 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 Global X and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Seasonal and First Trust Cboe, you can compare the effects of market volatilities on Global X and First Trust 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 Global X with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and First Trust.
Diversification Opportunities for Global X and First Trust
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global X Seasonal and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and Global X 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 Global X Seasonal are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Cboe has no effect on the direction of Global X i.e., Global X and First Trust go up and down completely randomly.
Pair Corralation between Global X and First Trust
Assuming the 90 days trading horizon Global X Seasonal is expected to generate 3.76 times more return on investment than First Trust. However, Global X is 3.76 times more volatile than First Trust Cboe. It trades about 0.13 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.31 per unit of risk. If you would invest 3,122 in Global X Seasonal on August 29, 2024 and sell it today you would earn a total of 78.00 from holding Global X Seasonal or generate 2.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Global X Seasonal vs. First Trust Cboe
Performance |
| Timeline |
| Global X Seasonal |
| First Trust Cboe |
Global X and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and First Trust
The main advantage of trading using opposite Global X and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Global X vs. Global X Active | Global X vs. Global X Active | Global X vs. Global X Active | Global X vs. Global X Active |
| First Trust vs. iShares SPTSX 60 | First Trust vs. iShares Core SP | First Trust vs. iShares Core SPTSX | First Trust vs. BMO Aggregate Bond |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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