Correlation Between Global X and US Treasury

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

By analyzing existing cross correlation between Global X Funds and US Treasury 6, you can compare the effects of market volatilities on Global X and US Treasury 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 US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and US Treasury.

Diversification Opportunities for Global X and US Treasury

0.05

Correlation Coefficient

Global X  US Treasury

Significant diversification

The 3 months correlation between Global and XBIL is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and US Treasury 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 6 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 Funds are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 6 has no effect on the direction of Global X i.e., Global X and US Treasury go up and down completely randomly.

Pair Corralation between Global X and US Treasury

Given the investment horizon of 90 days Global X is expected to generate 1.37 times less return on investment than US Treasury. In addition to that, Global X is 12.3 times more volatile than US Treasury 6. It trades about 0.05 of its total potential returns per unit of risk. US Treasury 6 is currently generating about 0.83 per unit of volatility. If you would invest  4,964  in US Treasury 6 on November 28, 2024 and sell it today you would earn a total of  52.00  from holding US Treasury 6 or generate 1.05% return on investment over 90 days.

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

Global X Funds  vs.  US Treasury 6

Global X Funds

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Global X is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

US Treasury 6

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 6 are ranked lower than 64 (%) 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.

Pair Trading with Global X and US Treasury

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

The idea behind Global X Funds and US Treasury 6 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.