Correlation Between IShares Telecommunicatio and Global X

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

Diversification Opportunities for IShares Telecommunicatio and Global X

0.62

Correlation Coefficient

IShares Telecommunicatio  Global X

Poor diversification

The 3 months correlation between IShares and Global is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Telecommunications ETF and Global X Thematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Thematic and IShares Telecommunicatio 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 Telecommunications 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 Thematic has no effect on the direction of IShares Telecommunicatio i.e., IShares Telecommunicatio and Global X go up and down completely randomly.

Pair Corralation between IShares Telecommunicatio and Global X

Considering the 90-day investment horizon iShares Telecommunications ETF is expected to generate 0.61 times more return on investment than Global X. However, iShares Telecommunications ETF is 1.63 times less risky than Global X. It trades about 0.28 of its potential returns per unit of risk. Global X Thematic is currently generating about 0.09 per unit of risk. If you would invest  2,432  in iShares Telecommunications ETF on September 15, 2024 and sell it today you would earn a total of  370.00  from holding iShares Telecommunications ETF or generate 15.21% return on investment over 90 days.

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

iShares Telecommunications ETF  vs.  Global X Thematic

IShares Telecommunicatio

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Telecommunications ETF are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, IShares Telecommunicatio showed solid returns over the last few months and may actually be approaching a breakup point.

Global X Thematic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Thematic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Telecommunicatio and Global X

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

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.