Correlation Between Defiance Next and Global X
Can any of the company-specific risk be diversified away by investing in both Defiance Next 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 Defiance Next and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defiance Next Gen and Global X CleanTech, you can compare the effects of market volatilities on Defiance Next 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 Defiance Next with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defiance Next and Global X.
Diversification Opportunities for Defiance Next and Global X
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Defiance and Global is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Next Gen and Global X CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X CleanTech and Defiance Next 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 Defiance Next Gen 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 CleanTech has no effect on the direction of Defiance Next i.e., Defiance Next and Global X go up and down completely randomly.
Pair Corralation between Defiance Next and Global X
Given the investment horizon of 90 days Defiance Next Gen is expected to under-perform the Global X. In addition to that, Defiance Next is 1.05 times more volatile than Global X CleanTech. It trades about -0.03 of its total potential returns per unit of risk. Global X CleanTech is currently generating about -0.03 per unit of volatility. If you would invest 945.00 in Global X CleanTech on September 1, 2024 and sell it today you would lose (203.00) from holding Global X CleanTech or give up 21.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Defiance Next Gen vs. Global X CleanTech
Performance |
| Timeline |
| Defiance Next Gen |
| Global X CleanTech |
Defiance Next and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defiance Next and Global X
The main advantage of trading using opposite Defiance Next and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defiance Next 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.| Defiance Next vs. Global X Hydrogen | Defiance Next vs. Fusion Fuel Green | Defiance Next vs. Amplify Lithium Battery | Defiance Next vs. Global X CleanTech |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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