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 5 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

0.98

Correlation Coefficient

US Treasury  Global X

Almost no diversification

The 3 months correlation between UFIV and Global is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 5 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 5 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 1544.0 times less return on investment than Global X. But when comparing it to its historical volatility, US Treasury 5 is 444.39 times less risky than Global X. It trades about 0.03 of its potential returns per unit of risk. Global X Funds is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Global X Funds on September 14, 2024 and sell it today you would earn a total of  4,866  from holding Global X Funds or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	27.42%
Values	Daily Returns

US Treasury 5  vs.  Global X Funds

US Treasury 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Global X Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Funds has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Global X is not utilizing all of its potentials. The recent 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 5 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.