Correlation Between Global X and IShares Russell

Can any of the company-specific risk be diversified away by investing in both Global X and IShares Russell 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 Russell 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 iShares Russell Mid Cap, you can compare the effects of market volatilities on Global X and IShares Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares Russell.

Diversification Opportunities for Global X and IShares Russell

-0.5

Correlation Coefficient

Global X  IShares Russell

Very good diversification

The 3 months correlation between Global and IShares is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and iShares Russell Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Mid 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 IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Mid has no effect on the direction of Global X i.e., Global X and IShares Russell go up and down completely randomly.

Pair Corralation between Global X and IShares Russell

Considering the 90-day investment horizon Global X is expected to generate 6.47 times less return on investment than IShares Russell. But when comparing it to its historical volatility, Global X Funds is 1.04 times less risky than IShares Russell. It trades about 0.04 of its potential returns per unit of risk. iShares Russell Mid Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  11,433  in iShares Russell Mid Cap on September 15, 2024 and sell it today you would earn a total of  1,934  from holding iShares Russell Mid Cap or generate 16.92% return on investment over 90 days.

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

Global X Funds  vs.  iShares Russell Mid Cap

Global X Funds

Risk-Adjusted Performance

3 of 100

Insignificant

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. In spite of rather sound primary indicators, Global X is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Russell Mid

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Mid Cap are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IShares Russell reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and IShares Russell

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

The idea behind Global X Funds and iShares Russell Mid Cap 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.