Correlation Between Russell Australian and Global X
Can any of the company-specific risk be diversified away by investing in both Russell Australian 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 Russell Australian and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell Australian Government and Global X SP, you can compare the effects of market volatilities on Russell Australian 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 Russell Australian with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell Australian and Global X.
Diversification Opportunities for Russell Australian and Global X
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Russell and Global is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Russell Australian Government and Global X SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SP and Russell Australian 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 Russell Australian Government 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 SP has no effect on the direction of Russell Australian i.e., Russell Australian and Global X go up and down completely randomly.
Pair Corralation between Russell Australian and Global X
Assuming the 90 days trading horizon Russell Australian is expected to generate 160.14 times less return on investment than Global X. But when comparing it to its historical volatility, Russell Australian Government is 1.91 times less risky than Global X. It trades about 0.0 of its potential returns per unit of risk. Global X SP is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,000.00 in Global X SP on August 30, 2024 and sell it today you would earn a total of 109.00 from holding Global X SP or generate 10.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 9.44% |
| Values | Daily Returns |
Russell Australian Government vs. Global X SP
Performance |
| Timeline |
| Russell Australian |
| Global X SP |
Russell Australian and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell Australian and Global X
The main advantage of trading using opposite Russell Australian and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell Australian 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.The idea behind Russell Australian Government and Global X SP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Global X vs. BetaShares Geared Australian | Global X vs. BetaShares Global Robotics | Global X vs. iShares China LargeCap | Global X vs. Russell Australian Government |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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