Correlation Between Global X and IShares NASDAQ

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

By analyzing existing cross correlation between Global X SP and iShares NASDAQ 100, you can compare the effects of market volatilities on Global X and IShares NASDAQ 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 NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares NASDAQ.

Diversification Opportunities for Global X and IShares NASDAQ

0.96

Correlation Coefficient

Global X  IShares NASDAQ

Almost no diversification

The 3 months correlation between Global and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Global X SP and iShares NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NASDAQ 100 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 SP are associated (or correlated) with IShares NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NASDAQ 100 has no effect on the direction of Global X i.e., Global X and IShares NASDAQ go up and down completely randomly.

Pair Corralation between Global X and IShares NASDAQ

Assuming the 90 days trading horizon Global X SP is expected to generate 0.69 times more return on investment than IShares NASDAQ. However, Global X SP is 1.46 times less risky than IShares NASDAQ. It trades about -0.09 of its potential returns per unit of risk. iShares NASDAQ 100 is currently generating about -0.1 per unit of risk. If you would invest  8,691  in Global X SP on December 30, 2024 and sell it today you would lose (489.00) from holding Global X SP or give up 5.63% of portfolio value over 90 days.

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

Global X SP  vs.  iShares NASDAQ 100

Global X SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Global X and IShares NASDAQ

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

The idea behind Global X SP and iShares NASDAQ 100 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.