Correlation Between Global X and Utilities Select

Can any of the company-specific risk be diversified away by investing in both Global X and Utilities 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 Utilities Select into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X and Utilities Select Sector, you can compare the effects of market volatilities on Global X and Utilities 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 Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Utilities Select.

Diversification Opportunities for Global X and Utilities Select

-0.86

Correlation Coefficient

Global X  Utilities Select

Pay attention - limited upside

The 3 months correlation between Global and Utilities is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Global X and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities 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 are associated (or correlated) with Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of Global X i.e., Global X and Utilities Select go up and down completely randomly.

Pair Corralation between Global X and Utilities Select

If you would invest  6,497  in Utilities Select Sector on February 4, 2024 and sell it today you would earn a total of  344.00  from holding Utilities Select Sector or generate 5.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	4.35%
Values	Daily Returns

Global X  vs.  Utilities Select Sector

Global X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Utilities Select Sector

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Select Sector are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Utilities Select unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Utilities Select

The main advantage of trading using opposite Global X and Utilities Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Utilities 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 Utilities Select will offset losses from the drop in Utilities Select's long position.

The idea behind Global X and Utilities 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.