Correlation Between IShares Biotechnology and Global X

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

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

Diversification Opportunities for IShares Biotechnology and Global X

0.64

Correlation Coefficient

IShares Biotechnology  Global X

Poor diversification

The 3 months correlation between IShares and Global is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Biotechnology ETF and Global X Aging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Aging and IShares Biotechnology 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 iShares Biotechnology ETF 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 Aging has no effect on the direction of IShares Biotechnology i.e., IShares Biotechnology and Global X go up and down completely randomly.

Pair Corralation between IShares Biotechnology and Global X

Considering the 90-day investment horizon iShares Biotechnology ETF is expected to under-perform the Global X. In addition to that, IShares Biotechnology is 1.34 times more volatile than Global X Aging. It trades about -0.01 of its total potential returns per unit of risk. Global X Aging is currently generating about 0.08 per unit of volatility. If you would invest  3,010  in Global X Aging on December 29, 2024 and sell it today you would earn a total of  115.00  from holding Global X Aging or generate 3.82% return on investment over 90 days.

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

iShares Biotechnology ETF  vs.  Global X Aging

iShares Biotechnology ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Biotechnology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, IShares Biotechnology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Global X Aging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Aging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Biotechnology and Global X

The main advantage of trading using opposite IShares Biotechnology and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Biotechnology 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 iShares Biotechnology ETF and Global X Aging 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.