Correlation Between Global X and FT AlphaDEX
Can any of the company-specific risk be diversified away by investing in both Global X and FT AlphaDEX 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 FT AlphaDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Active and FT AlphaDEX Industrials, you can compare the effects of market volatilities on Global X and FT AlphaDEX 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 FT AlphaDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and FT AlphaDEX.
Diversification Opportunities for Global X and FT AlphaDEX
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Global and FHG is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active and FT AlphaDEX Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT AlphaDEX Industrials 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 Active are associated (or correlated) with FT AlphaDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT AlphaDEX Industrials has no effect on the direction of Global X i.e., Global X and FT AlphaDEX go up and down completely randomly.
Pair Corralation between Global X and FT AlphaDEX
Assuming the 90 days trading horizon Global X is expected to generate 39.31 times less return on investment than FT AlphaDEX. But when comparing it to its historical volatility, Global X Active is 2.83 times less risky than FT AlphaDEX. It trades about 0.02 of its potential returns per unit of risk. FT AlphaDEX Industrials is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 5,159 in FT AlphaDEX Industrials on August 29, 2024 and sell it today you would earn a total of 1,026 from holding FT AlphaDEX Industrials or generate 19.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Global X Active vs. FT AlphaDEX Industrials
Performance |
| Timeline |
| Global X Active |
| FT AlphaDEX Industrials |
Global X and FT AlphaDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and FT AlphaDEX
The main advantage of trading using opposite Global X and FT AlphaDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, FT AlphaDEX 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 FT AlphaDEX will offset losses from the drop in FT AlphaDEX's long position.The idea behind Global X Active and FT AlphaDEX Industrials 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.| FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust Senior | FT AlphaDEX vs. First Trust Value |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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