Correlation Between US Global and NATO

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

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

Diversification Opportunities for US Global and NATO

0.75

Correlation Coefficient

US Global  NATO

Poor diversification

The 3 months correlation between JETS and NATO is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding US Global Jets and NATO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATO and US Global 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 US Global Jets are associated (or correlated) with NATO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATO has no effect on the direction of US Global i.e., US Global and NATO go up and down completely randomly.

Pair Corralation between US Global and NATO

Given the investment horizon of 90 days US Global Jets is expected to generate 1.29 times more return on investment than NATO. However, US Global is 1.29 times more volatile than NATO. It trades about 0.21 of its potential returns per unit of risk. NATO is currently generating about 0.0 per unit of risk. If you would invest  1,979  in US Global Jets on September 20, 2024 and sell it today you would earn a total of  458.00  from holding US Global Jets or generate 23.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.19%
Values	Daily Returns

US Global Jets  vs.  NATO

US Global Jets

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Global Jets are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, US Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

NATO

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with US Global and NATO

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

The idea behind US Global Jets and NATO 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.