Correlation Between Main Sector and Global X
Can any of the company-specific risk be diversified away by investing in both Main Sector 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 Main Sector and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Sector Rotation and Global X Thematic, you can compare the effects of market volatilities on Main Sector 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 Main Sector with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Sector and Global X.
Diversification Opportunities for Main Sector and Global X
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Main and Global is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Main Sector Rotation and Global X Thematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Thematic and Main Sector 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 Main Sector Rotation 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 Thematic has no effect on the direction of Main Sector i.e., Main Sector and Global X go up and down completely randomly.
Pair Corralation between Main Sector and Global X
Given the investment horizon of 90 days Main Sector Rotation is expected to generate 0.93 times more return on investment than Global X. However, Main Sector Rotation is 1.07 times less risky than Global X. It trades about 0.17 of its potential returns per unit of risk. Global X Thematic is currently generating about 0.06 per unit of risk. If you would invest 5,390 in Main Sector Rotation on August 25, 2024 and sell it today you would earn a total of 223.00 from holding Main Sector Rotation or generate 4.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Sector Rotation vs. Global X Thematic
Performance |
| Timeline |
| Main Sector Rotation |
| Global X Thematic |
Main Sector and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Sector and Global X
The main advantage of trading using opposite Main Sector and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Sector 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.| Main Sector vs. Main Thematic Innovation | Main Sector vs. SPDR SSGA Sector | Main Sector vs. iShares MSCI USA | Main Sector vs. SPDR MSCI USA |
| Global X vs. Main Sector Rotation | Global X vs. Franklin Exponential Data | Global X vs. Goldman Sachs Innovate |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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