Correlation Between Invesco NASDAQ and Global X

Can any of the company-specific risk be diversified away by investing in both Invesco NASDAQ 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 Invesco NASDAQ and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco NASDAQ Internet and Global X Social, you can compare the effects of market volatilities on Invesco NASDAQ 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 Invesco NASDAQ with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco NASDAQ and Global X.

Diversification Opportunities for Invesco NASDAQ and Global X

0.5

Correlation Coefficient

Invesco NASDAQ  Global X

Very weak diversification

The 3 months correlation between Invesco and Global is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ Internet and Global X Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Social and Invesco NASDAQ 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 Invesco NASDAQ Internet 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 Social has no effect on the direction of Invesco NASDAQ i.e., Invesco NASDAQ and Global X go up and down completely randomly.

Pair Corralation between Invesco NASDAQ and Global X

Given the investment horizon of 90 days Invesco NASDAQ Internet is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, Invesco NASDAQ Internet is 1.07 times less risky than Global X. The etf trades about -0.06 of its potential returns per unit of risk. The Global X Social is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,258  in Global X Social on December 29, 2024 and sell it today you would earn a total of  154.00  from holding Global X Social or generate 3.62% return on investment over 90 days.

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

Invesco NASDAQ Internet  vs.  Global X Social

Invesco NASDAQ Internet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco NASDAQ Internet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Invesco NASDAQ is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Global X Social

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Social are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Global X is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Invesco NASDAQ and Global X

The main advantage of trading using opposite Invesco NASDAQ and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco NASDAQ 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 Invesco NASDAQ Internet and Global X Social 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.