Correlation Between Financial Select and Global X
Can any of the company-specific risk be diversified away by investing in both Financial 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 Financial 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 Financial Select Sector and Global X SP, you can compare the effects of market volatilities on Financial 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 Financial Select with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and Global X.
Diversification Opportunities for Financial Select and Global X
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Financial and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector 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 Financial 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 Financial 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 SP has no effect on the direction of Financial Select i.e., Financial Select and Global X go up and down completely randomly.
Pair Corralation between Financial Select and Global X
Considering the 90-day investment horizon Financial Select Sector is expected to generate 1.82 times more return on investment than Global X. However, Financial Select is 1.82 times more volatile than Global X SP. It trades about 0.26 of its potential returns per unit of risk. Global X SP is currently generating about 0.14 per unit of risk. If you would invest 4,663 in Financial Select Sector on August 26, 2024 and sell it today you would earn a total of 410.00 from holding Financial Select Sector or generate 8.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Select Sector vs. Global X SP
Performance |
| Timeline |
| Financial Select Sector |
| Global X SP |
Financial Select and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and Global X
The main advantage of trading using opposite Financial Select and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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.| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
| Global X vs. FT Vest Equity | Global X vs. Northern Lights | Global X vs. Dimensional International High | Global X vs. First Trust Exchange Traded |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |