Correlation Between Global Atomic and Global X

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

By analyzing existing cross correlation between Global Atomic Corp and Global X Lithium, you can compare the effects of market volatilities on Global Atomic 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 Global Atomic with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Atomic and Global X.

Diversification Opportunities for Global Atomic and Global X

-0.48

Correlation Coefficient

Global Atomic  Global X

Very good diversification

The 3 months correlation between Global and Global is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Global Atomic Corp and Global X Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Lithium and Global Atomic 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 Atomic Corp 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 Lithium has no effect on the direction of Global Atomic i.e., Global Atomic and Global X go up and down completely randomly.

Pair Corralation between Global Atomic and Global X

Assuming the 90 days trading horizon Global Atomic Corp is expected to under-perform the Global X. In addition to that, Global Atomic is 1.79 times more volatile than Global X Lithium. It trades about -0.01 of its total potential returns per unit of risk. Global X Lithium is currently generating about 0.11 per unit of volatility. If you would invest  1,427  in Global X Lithium on September 3, 2024 and sell it today you would earn a total of  254.00  from holding Global X Lithium or generate 17.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Global Atomic Corp  vs.  Global X Lithium

Global Atomic Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global X Lithium

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Lithium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Global X displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Atomic and Global X

The main advantage of trading using opposite Global Atomic and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Atomic 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.

The idea behind Global Atomic Corp and Global X Lithium 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.