Correlation Between Global X and Principal Spectrum
Can any of the company-specific risk be diversified away by investing in both Global X and Principal Spectrum 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 Principal Spectrum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Preferred and Principal Spectrum Preferred, you can compare the effects of market volatilities on Global X and Principal Spectrum 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 Principal Spectrum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Principal Spectrum.
Diversification Opportunities for Global X and Principal Spectrum
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Principal is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Global X Preferred and Principal Spectrum Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Spectrum 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 Preferred are associated (or correlated) with Principal Spectrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Spectrum has no effect on the direction of Global X i.e., Global X and Principal Spectrum go up and down completely randomly.
Pair Corralation between Global X and Principal Spectrum
Given the investment horizon of 90 days Global X Preferred is expected to under-perform the Principal Spectrum. In addition to that, Global X is 3.4 times more volatile than Principal Spectrum Preferred. It trades about -0.08 of its total potential returns per unit of risk. Principal Spectrum Preferred is currently generating about 0.03 per unit of volatility. If you would invest 1,869 in Principal Spectrum Preferred on August 28, 2024 and sell it today you would earn a total of 4.00 from holding Principal Spectrum Preferred or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Preferred vs. Principal Spectrum Preferred
Performance |
| Timeline |
| Global X Preferred |
| Principal Spectrum |
Global X and Principal Spectrum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Principal Spectrum
The main advantage of trading using opposite Global X and Principal Spectrum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Principal Spectrum 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 Principal Spectrum will offset losses from the drop in Principal Spectrum's long position.| Global X vs. VanEck Preferred Securities | Global X vs. Global X SuperIncome | Global X vs. Virtus InfraCap Preferred | Global X vs. SPDR ICE Preferred |
| Principal Spectrum vs. Managed Account Series | Principal Spectrum vs. Fidelity Sai International | Principal Spectrum vs. Schwab Strategic Trust | Principal Spectrum vs. Prairie Provident Resources |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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