Correlation Between IShares Infrastructure and Global X

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

Diversification Opportunities for IShares Infrastructure and Global X

0.93

Correlation Coefficient

IShares Infrastructure  Global X

Almost no diversification

The 3 months correlation between IShares and Global is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Infrastructure ETF and Global X Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Infrastructure and IShares Infrastructure 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 Infrastructure 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 Infrastructure has no effect on the direction of IShares Infrastructure i.e., IShares Infrastructure and Global X go up and down completely randomly.

Pair Corralation between IShares Infrastructure and Global X

Given the investment horizon of 90 days iShares Infrastructure ETF is expected to generate 0.77 times more return on investment than Global X. However, iShares Infrastructure ETF is 1.3 times less risky than Global X. It trades about -0.02 of its potential returns per unit of risk. Global X Infrastructure is currently generating about -0.08 per unit of risk. If you would invest  4,591  in iShares Infrastructure ETF on December 29, 2024 and sell it today you would lose (86.00) from holding iShares Infrastructure ETF or give up 1.87% of portfolio value over 90 days.

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

iShares Infrastructure ETF  vs.  Global X Infrastructure

iShares Infrastructure

Risk-Adjusted Performance

Very Weak

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

Global X Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with IShares Infrastructure and Global X

The main advantage of trading using opposite IShares Infrastructure and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Infrastructure 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 Infrastructure ETF and Global X Infrastructure 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.