Correlation Between Tres Tentos and Global X

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

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

Diversification Opportunities for Tres Tentos and Global X

0.79

Correlation Coefficient

Tres Tentos  Global X

Poor diversification

The 3 months correlation between Tres and Global is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tres Tentos Agroindustrial 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 Tres Tentos 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 Tres Tentos Agroindustrial 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 Tres Tentos i.e., Tres Tentos and Global X go up and down completely randomly.

Pair Corralation between Tres Tentos and Global X

Assuming the 90 days trading horizon Tres Tentos Agroindustrial is expected to under-perform the Global X. In addition to that, Tres Tentos is 1.63 times more volatile than Global X Funds. It trades about -0.03 of its total potential returns per unit of risk. Global X Funds is currently generating about 0.03 per unit of volatility. If you would invest  4,880  in Global X Funds on September 24, 2024 and sell it today you would earn a total of  40.00  from holding Global X Funds or generate 0.82% return on investment over 90 days.

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

Tres Tentos Agroindustrial  vs.  Global X Funds

Tres Tentos Agroindu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tres Tentos Agroindustrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Tres Tentos unveiled solid returns over the last few months and may actually be approaching a breakup point.

Global X Funds

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tres Tentos and Global X

The main advantage of trading using opposite Tres Tentos and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tres Tentos 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 Tres Tentos Agroindustrial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.