Correlation Between IShares Morningstar and Global X

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

Diversification Opportunities for IShares Morningstar and Global X

0.35

Correlation Coefficient

IShares Morningstar  Global X

Weak diversification

The 3 months correlation between IShares and Global is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding iShares Morningstar Mid Cap and Global X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X and IShares Morningstar 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 Morningstar 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 has no effect on the direction of IShares Morningstar i.e., IShares Morningstar and Global X go up and down completely randomly.

Pair Corralation between IShares Morningstar and Global X

Considering the 90-day investment horizon IShares Morningstar is expected to generate 1.77 times less return on investment than Global X. But when comparing it to its historical volatility, iShares Morningstar Mid Cap is 1.39 times less risky than Global X. It trades about 0.07 of its potential returns per unit of risk. Global X is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,447  in Global X on October 21, 2024 and sell it today you would earn a total of  366.00  from holding Global X or generate 14.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.6%
Values	Daily Returns

iShares Morningstar Mid Cap  vs.  Global X

iShares Morningstar Mid

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Morningstar Mid Cap are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, IShares Morningstar is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Global X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Global X is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Morningstar and Global X

The main advantage of trading using opposite IShares Morningstar and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Morningstar 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 Morningstar Mid Cap and Global X 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.