Correlation Between IShares Trust and Global X
Can any of the company-specific risk be diversified away by investing in both IShares Trust 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 Trust 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 Trust and Global X Lithium, you can compare the effects of market volatilities on IShares Trust 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 Trust with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Global X.
Diversification Opportunities for IShares Trust and Global X
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Global is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Global X Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Lithium and IShares Trust 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 Trust 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 Lithium has no effect on the direction of IShares Trust i.e., IShares Trust and Global X go up and down completely randomly.
Pair Corralation between IShares Trust and Global X
Given the investment horizon of 90 days IShares Trust is expected to generate 6.43 times less return on investment than Global X. But when comparing it to its historical volatility, iShares Trust is 4.9 times less risky than Global X. It trades about 0.08 of its potential returns per unit of risk. Global X Lithium is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,791 in Global X Lithium on August 30, 2024 and sell it today you would earn a total of 674.00 from holding Global X Lithium or generate 17.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
iShares Trust vs. Global X Lithium
Performance |
Timeline |
iShares Trust |
Global X Lithium |
IShares Trust and Global X Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Trust and Global X
The main advantage of trading using opposite IShares Trust and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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.IShares Trust vs. First Trust Multi Asset | IShares Trust vs. Collaborative Investment Series | IShares Trust vs. Akros Monthly Payout | IShares Trust vs. Northern Lights |
Global X vs. Invesco Solar ETF | Global X vs. Albemarle Corp | Global X vs. Lithium Americas Corp | Global X vs. iShares Global Clean |
Check out your portfolio center.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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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