Correlation Between Global X and NEOS Russell

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

By analyzing existing cross correlation between Global X Russell and NEOS Russell 2000, you can compare the effects of market volatilities on Global X and NEOS Russell 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 NEOS Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and NEOS Russell.

Diversification Opportunities for Global X and NEOS Russell

0.98

Correlation Coefficient

Global X  NEOS Russell

Almost no diversification

The 3 months correlation between Global and NEOS is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Global X Russell and NEOS Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEOS Russell 2000 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 Russell are associated (or correlated) with NEOS Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEOS Russell 2000 has no effect on the direction of Global X i.e., Global X and NEOS Russell go up and down completely randomly.

Pair Corralation between Global X and NEOS Russell

Given the investment horizon of 90 days Global X is expected to generate 1.43 times less return on investment than NEOS Russell. But when comparing it to its historical volatility, Global X Russell is 1.3 times less risky than NEOS Russell. It trades about 0.19 of its potential returns per unit of risk. NEOS Russell 2000 is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,813  in NEOS Russell 2000 on September 2, 2024 and sell it today you would earn a total of  532.00  from holding NEOS Russell 2000 or generate 11.05% return on investment over 90 days.

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

Global X Russell  vs.  NEOS Russell 2000

Global X Russell

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Russell are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NEOS Russell 2000

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NEOS Russell 2000 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, NEOS Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and NEOS Russell

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

The idea behind Global X Russell and NEOS Russell 2000 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.