Correlation Between Global X and Financial Select
Can any of the company-specific risk be diversified away by investing in both Global X and Financial Select 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 Global X and Financial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Silver and Financial Select Sector, you can compare the effects of market volatilities on Global X and Financial Select 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 Global X with a short position of Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Financial Select.
Diversification Opportunities for Global X and Financial Select
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and Financial is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Global X Silver and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector and Global X 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 Global X Silver are associated (or correlated) with Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of Global X i.e., Global X and Financial Select go up and down completely randomly.
Pair Corralation between Global X and Financial Select
Considering the 90-day investment horizon Global X Silver is expected to generate 2.73 times more return on investment than Financial Select. However, Global X is 2.73 times more volatile than Financial Select Sector. It trades about 0.37 of its potential returns per unit of risk. Financial Select Sector is currently generating about -0.01 per unit of risk. If you would invest 2,618 in Global X Silver on January 25, 2024 and sell it today you would earn a total of 483.00 from holding Global X Silver or generate 18.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Global X Silver vs. Financial Select Sector
Performance |
| Timeline |
| Global X Silver |
| Financial Select Sector |
Global X and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Financial Select
The main advantage of trading using opposite Global X and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Financial Select 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 Financial Select will offset losses from the drop in Financial Select's long position.The idea behind Global X Silver and Financial Select Sector 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.| Financial Select vs. Virtus InfraCap Preferred | Financial Select vs. XAI Octagon Floating | Financial Select vs. Amplify High Income | Financial Select vs. Triplepoint Venture Growth |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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