Correlation Between ETC 6 and Global X
Can any of the company-specific risk be diversified away by investing in both ETC 6 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 ETC 6 and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETC 6 Meridian and Global X Russell, you can compare the effects of market volatilities on ETC 6 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 ETC 6 with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETC 6 and Global X.
Diversification Opportunities for ETC 6 and Global X
Poor diversification
The 3 months correlation between ETC and Global is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ETC 6 Meridian and Global X Russell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Russell and ETC 6 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 ETC 6 Meridian 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 Russell has no effect on the direction of ETC 6 i.e., ETC 6 and Global X go up and down completely randomly.
Pair Corralation between ETC 6 and Global X
Given the investment horizon of 90 days ETC 6 is expected to generate 3.19 times less return on investment than Global X. But when comparing it to its historical volatility, ETC 6 Meridian is 3.52 times less risky than Global X. It trades about 0.26 of its potential returns per unit of risk. Global X Russell is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,583 in Global X Russell on August 30, 2024 and sell it today you would earn a total of 163.00 from holding Global X Russell or generate 6.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ETC 6 Meridian vs. Global X Russell
Performance |
| Timeline |
| ETC 6 Meridian |
| Global X Russell |
ETC 6 and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETC 6 and Global X
The main advantage of trading using opposite ETC 6 and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETC 6 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.| ETC 6 vs. 6 Meridian Mega | ETC 6 vs. 6 Meridian Low | ETC 6 vs. 6 Meridian Small | ETC 6 vs. Overlay Shares Large |
| Global X vs. Global X SP | Global X vs. Global X Nasdaq | Global X vs. Global X Funds | Global X vs. Global X Funds |
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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