Correlation Between Global X and ETRACS Alerian
Can any of the company-specific risk be diversified away by investing in both Global X and ETRACS Alerian 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 ETRACS Alerian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X MLP and ETRACS Alerian Midstream, you can compare the effects of market volatilities on Global X and ETRACS Alerian 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 ETRACS Alerian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and ETRACS Alerian.
Diversification Opportunities for Global X and ETRACS Alerian
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and ETRACS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Global X MLP and ETRACS Alerian Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Alerian Midstream 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 MLP are associated (or correlated) with ETRACS Alerian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Alerian Midstream has no effect on the direction of Global X i.e., Global X and ETRACS Alerian go up and down completely randomly.
Pair Corralation between Global X and ETRACS Alerian
Given the investment horizon of 90 days Global X is expected to generate 1.47 times less return on investment than ETRACS Alerian. But when comparing it to its historical volatility, Global X MLP is 1.11 times less risky than ETRACS Alerian. It trades about 0.09 of its potential returns per unit of risk. ETRACS Alerian Midstream is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,422 in ETRACS Alerian Midstream on August 26, 2024 and sell it today you would earn a total of 2,225 from holding ETRACS Alerian Midstream or generate 65.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X MLP vs. ETRACS Alerian Midstream
Performance |
| Timeline |
| Global X MLP |
| ETRACS Alerian Midstream |
Global X and ETRACS Alerian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and ETRACS Alerian
The main advantage of trading using opposite Global X and ETRACS Alerian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, ETRACS Alerian 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 ETRACS Alerian will offset losses from the drop in ETRACS Alerian's long position.| Global X vs. Global X MLP | Global X vs. InfraCap MLP ETF | Global X vs. Alerian MLP ETF | Global X vs. First Trust North |
| ETRACS Alerian vs. UBS AG London | ETRACS Alerian vs. UBS AG London | ETRACS Alerian vs. ETRACS 2xMonthly Pay | ETRACS Alerian vs. UBS AG London |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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