Correlation Between IShares SP and Global X

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

Diversification Opportunities for IShares SP and Global X

0.88

Correlation Coefficient

IShares SP  Global X

Very poor diversification

The 3 months correlation between IShares and Global is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap and Global X Adaptive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Adaptive and IShares SP 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 SP Mid Cap 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 Adaptive has no effect on the direction of IShares SP i.e., IShares SP and Global X go up and down completely randomly.

Pair Corralation between IShares SP and Global X

Considering the 90-day investment horizon iShares SP Mid Cap is expected to under-perform the Global X. In addition to that, IShares SP is 1.44 times more volatile than Global X Adaptive. It trades about -0.22 of its total potential returns per unit of risk. Global X Adaptive is currently generating about -0.23 per unit of volatility. If you would invest  4,373  in Global X Adaptive on October 8, 2024 and sell it today you would lose (152.00) from holding Global X Adaptive or give up 3.48% of portfolio value over 90 days.

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

iShares SP Mid Cap  vs.  Global X Adaptive

iShares SP Mid

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days iShares SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady forward-looking indicators, IShares SP is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Global X Adaptive

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Adaptive are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares SP and Global X

The main advantage of trading using opposite IShares SP and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP Mid Cap and Global X Adaptive 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 Global Correlations module to find global opportunities by holding instruments from different markets.