Correlation Between Energy Leaders and Global X
Can any of the company-specific risk be diversified away by investing in both Energy Leaders 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 Energy Leaders and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Leaders Plus and Global X SPTSX, you can compare the effects of market volatilities on Energy Leaders 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 Energy Leaders with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Leaders and Global X.
Diversification Opportunities for Energy Leaders and Global X
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Energy and Global is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Energy Leaders Plus and Global X SPTSX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SPTSX and Energy Leaders 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 Energy Leaders Plus 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 SPTSX has no effect on the direction of Energy Leaders i.e., Energy Leaders and Global X go up and down completely randomly.
Pair Corralation between Energy Leaders and Global X
Assuming the 90 days trading horizon Energy Leaders Plus is expected to generate 0.69 times more return on investment than Global X. However, Energy Leaders Plus is 1.45 times less risky than Global X. It trades about -0.01 of its potential returns per unit of risk. Global X SPTSX is currently generating about -0.02 per unit of risk. If you would invest 338.00 in Energy Leaders Plus on August 29, 2024 and sell it today you would lose (7.00) from holding Energy Leaders Plus or give up 2.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Leaders Plus vs. Global X SPTSX
Performance |
| Timeline |
| Energy Leaders Plus |
| Global X SPTSX |
Energy Leaders and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Leaders and Global X
The main advantage of trading using opposite Energy Leaders and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Leaders 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.| Energy Leaders vs. iShares SPTSX Capped | Energy Leaders vs. BMO Equal Weight | Energy Leaders vs. BMO SPTSX Equal | Energy Leaders vs. BMO Equal Weight |
| Global X vs. BMO Equal Weight | Global X vs. Global X Pipelines | Global X vs. Global X Crude | Global X vs. Global X SPTSX |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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