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 100 and Global X Cloud, 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

0.93

Correlation Coefficient

Invesco NASDAQ  Global X

Almost no diversification

The 3 months correlation between Invesco and Global is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ 100 and Global X Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Cloud 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 100 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 Cloud 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 100 is expected to generate 0.81 times more return on investment than Global X. However, Invesco NASDAQ 100 is 1.24 times less risky than Global X. It trades about -0.08 of its potential returns per unit of risk. Global X Cloud is currently generating about -0.08 per unit of risk. If you would invest  21,769  in Invesco NASDAQ 100 on December 26, 2024 and sell it today you would lose (1,456) from holding Invesco NASDAQ 100 or give up 6.69% of portfolio value over 90 days.

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

Invesco NASDAQ 100  vs.  Global X Cloud

Invesco NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest sluggish performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Global X Cloud

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Cloud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private 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 100 and Global X Cloud 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.