Correlation Between Global X and VanEck Biotech
Can any of the company-specific risk be diversified away by investing in both Global X and VanEck Biotech 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 VanEck Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X AgTech and VanEck Biotech ETF, you can compare the effects of market volatilities on Global X and VanEck Biotech 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 VanEck Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and VanEck Biotech.
Diversification Opportunities for Global X and VanEck Biotech
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Global and VanEck is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Global X AgTech and VanEck Biotech ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Biotech ETF 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 AgTech are associated (or correlated) with VanEck Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Biotech ETF has no effect on the direction of Global X i.e., Global X and VanEck Biotech go up and down completely randomly.
Pair Corralation between Global X and VanEck Biotech
Given the investment horizon of 90 days Global X AgTech is expected to generate 0.97 times more return on investment than VanEck Biotech. However, Global X AgTech is 1.03 times less risky than VanEck Biotech. It trades about 0.05 of its potential returns per unit of risk. VanEck Biotech ETF is currently generating about -0.13 per unit of risk. If you would invest 1,014 in Global X AgTech on August 28, 2024 and sell it today you would earn a total of 32.00 from holding Global X AgTech or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X AgTech vs. VanEck Biotech ETF
Performance |
| Timeline |
| Global X AgTech |
| VanEck Biotech ETF |
Global X and VanEck Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and VanEck Biotech
The main advantage of trading using opposite Global X and VanEck Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, VanEck Biotech 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 VanEck Biotech will offset losses from the drop in VanEck Biotech's long position.| Global X vs. Main Sector Rotation | Global X vs. Franklin Exponential Data | Global X vs. Goldman Sachs Innovate |
| VanEck Biotech vs. Global X Clean | VanEck Biotech vs. Global X Renewable | VanEck Biotech vs. Global X Thematic | VanEck Biotech vs. Global X AgTech |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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