Correlation Between Global X and IShares Tech

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

By analyzing existing cross correlation between Global X Artificial and iShares Tech Breakthrough, you can compare the effects of market volatilities on Global X and IShares Tech 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 IShares Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares Tech.

Diversification Opportunities for Global X and IShares Tech

0.94

Correlation Coefficient

Global X  IShares Tech

Almost no diversification

The 3 months correlation between Global and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Global X Artificial and iShares Tech Breakthrough in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Tech Breakthrough 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 Artificial are associated (or correlated) with IShares Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Tech Breakthrough has no effect on the direction of Global X i.e., Global X and IShares Tech go up and down completely randomly.

Pair Corralation between Global X and IShares Tech

Considering the 90-day investment horizon Global X Artificial is expected to generate 0.86 times more return on investment than IShares Tech. However, Global X Artificial is 1.16 times less risky than IShares Tech. It trades about 0.26 of its potential returns per unit of risk. iShares Tech Breakthrough is currently generating about 0.08 per unit of risk. If you would invest  3,837  in Global X Artificial on September 15, 2024 and sell it today you would earn a total of  177.00  from holding Global X Artificial or generate 4.61% return on investment over 90 days.

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

Global X Artificial  vs.  iShares Tech Breakthrough

Global X Artificial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Artificial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward indicators, Global X reported solid returns over the last few months and may actually be approaching a breakup point.

iShares Tech Breakthrough

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Tech Breakthrough are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, IShares Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and IShares Tech

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

The idea behind Global X Artificial and iShares Tech Breakthrough 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.