Correlation Between NATO and Global X

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

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

Diversification Opportunities for NATO and Global X

-0.13

Correlation Coefficient

NATO  Global X

Good diversification

The 3 months correlation between NATO and Global is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NATO 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 NATO 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 NATO 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 NATO i.e., NATO and Global X go up and down completely randomly.

Pair Corralation between NATO and Global X

Given the investment horizon of 90 days NATO is expected to generate 1.07 times more return on investment than Global X. However, NATO is 1.07 times more volatile than Global X Funds. It trades about 0.12 of its potential returns per unit of risk. Global X Funds is currently generating about 0.12 per unit of risk. If you would invest  2,539  in NATO on September 5, 2024 and sell it today you would earn a total of  139.00  from holding NATO or generate 5.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.38%
Values	Daily Returns

NATO  vs.  Global X Funds

NATO

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NATO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, NATO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X Funds

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NATO and Global X

The main advantage of trading using opposite NATO and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NATO 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 NATO 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.