Correlation Between Global X and IShares Convertible

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

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

Diversification Opportunities for Global X and IShares Convertible

0.73

Correlation Coefficient

Global X  IShares Convertible

Poor diversification

The 3 months correlation between Global and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Global X NASDAQ and iShares Convertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Convertible Bond and Global X 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 Global X NASDAQ are associated (or correlated) with IShares Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Convertible Bond has no effect on the direction of Global X i.e., Global X and IShares Convertible go up and down completely randomly.

Pair Corralation between Global X and IShares Convertible

Given the investment horizon of 90 days Global X NASDAQ is expected to generate 1.17 times more return on investment than IShares Convertible. However, Global X is 1.17 times more volatile than iShares Convertible Bond. It trades about 0.1 of its potential returns per unit of risk. iShares Convertible Bond is currently generating about 0.08 per unit of risk. If you would invest  1,499  in Global X NASDAQ on September 30, 2024 and sell it today you would earn a total of  373.00  from holding Global X NASDAQ or generate 24.88% return on investment over 90 days.

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

Global X NASDAQ  vs.  iShares Convertible Bond

Global X NASDAQ

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X NASDAQ are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Convertible Bond

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Convertible Bond are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Convertible is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Global X and IShares Convertible

The main advantage of trading using opposite Global X and IShares Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, IShares Convertible 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 IShares Convertible will offset losses from the drop in IShares Convertible's long position.

The idea behind Global X NASDAQ and iShares Convertible Bond 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.