Correlation Between Materials Select and Global X
Can any of the company-specific risk be diversified away by investing in both Materials Select 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 Materials Select and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Materials Select Sector and Global X Uranium, you can compare the effects of market volatilities on Materials Select 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 Materials Select with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Select and Global X.
Diversification Opportunities for Materials Select and Global X
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Materials and Global is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and Global X Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Uranium and Materials Select 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 Materials Select Sector 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 Uranium has no effect on the direction of Materials Select i.e., Materials Select and Global X go up and down completely randomly.
Pair Corralation between Materials Select and Global X
Considering the 90-day investment horizon Materials Select is expected to generate 3.03 times less return on investment than Global X. But when comparing it to its historical volatility, Materials Select Sector is 2.19 times less risky than Global X. It trades about 0.03 of its potential returns per unit of risk. Global X Uranium is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,129 in Global X Uranium on October 21, 2024 and sell it today you would earn a total of 674.00 from holding Global X Uranium or generate 31.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Materials Select Sector vs. Global X Uranium
Performance |
| Timeline |
| Materials Select Sector |
| Global X Uranium |
Materials Select and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Select and Global X
The main advantage of trading using opposite Materials Select and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select 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.| Materials Select vs. Industrial Select Sector | Materials Select vs. Consumer Discretionary Select | Materials Select vs. Consumer Staples Select | Materials Select vs. Utilities Select Sector |
| Global X vs. Sprott Uranium Miners | Global X vs. Uranium Energy Corp | Global X vs. Cameco Corp | Global X vs. Energy Fuels |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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