Correlation Between Themes Transatlantic and Global X

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

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

Diversification Opportunities for Themes Transatlantic and Global X

0.81

Correlation Coefficient

Themes Transatlantic  Global X

Very poor diversification

The 3 months correlation between Themes and Global is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Themes Transatlantic Defense 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 Themes Transatlantic 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 Themes Transatlantic Defense 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 Themes Transatlantic i.e., Themes Transatlantic and Global X go up and down completely randomly.

Pair Corralation between Themes Transatlantic and Global X

Given the investment horizon of 90 days Themes Transatlantic is expected to generate 6.78 times less return on investment than Global X. In addition to that, Themes Transatlantic is 1.19 times more volatile than Global X Funds. It trades about 0.02 of its total potential returns per unit of risk. Global X Funds is currently generating about 0.14 per unit of volatility. If you would invest  2,454  in Global X Funds on October 4, 2024 and sell it today you would earn a total of  1,268  from holding Global X Funds or generate 51.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	17.58%
Values	Daily Returns

Themes Transatlantic Defense  vs.  Global X Funds

Themes Transatlantic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Transatlantic Defense are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Themes Transatlantic is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Themes Transatlantic and Global X

The main advantage of trading using opposite Themes Transatlantic and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Themes Transatlantic 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 Themes Transatlantic Defense 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.