Correlation Between US Treasury and Global X

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

By analyzing existing cross correlation between US Treasury 12 and Global X Funds, you can compare the effects of market volatilities on US Treasury 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 US Treasury with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and Global X.

Diversification Opportunities for US Treasury and Global X

0.87

Correlation Coefficient

US Treasury  Global X

Very poor diversification

The 3 months correlation between OBIL and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds and US Treasury 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 Treasury 12 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 Funds has no effect on the direction of US Treasury i.e., US Treasury and Global X go up and down completely randomly.

Pair Corralation between US Treasury and Global X

Given the investment horizon of 90 days US Treasury is expected to generate 2.14 times less return on investment than Global X. In addition to that, US Treasury is 2.66 times more volatile than Global X Funds. It trades about 0.15 of its total potential returns per unit of risk. Global X Funds is currently generating about 0.84 per unit of volatility. If you would invest  9,928  in Global X Funds on September 4, 2024 and sell it today you would earn a total of  120.00  from holding Global X Funds or generate 1.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

US Treasury 12  vs.  Global X Funds

US Treasury 12

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 12 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Global X Funds

Risk-Adjusted Performance

65 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 65 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Global X is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with US Treasury and Global X

The main advantage of trading using opposite US Treasury and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury 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 US Treasury 12 and Global X Funds 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.