Correlation Between Global X and IShares Utilities

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

By analyzing existing cross correlation between Global X Renewable and iShares Utilities ETF, you can compare the effects of market volatilities on Global X and IShares Utilities 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 Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares Utilities.

Diversification Opportunities for Global X and IShares Utilities

-0.39

Correlation Coefficient

Global X  IShares Utilities

Very good diversification

The 3 months correlation between Global and IShares is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Global X Renewable and iShares Utilities ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Utilities ETF 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 Renewable are associated (or correlated) with IShares Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Utilities ETF has no effect on the direction of Global X i.e., Global X and IShares Utilities go up and down completely randomly.

Pair Corralation between Global X and IShares Utilities

Given the investment horizon of 90 days Global X Renewable is expected to under-perform the IShares Utilities. In addition to that, Global X is 1.05 times more volatile than iShares Utilities ETF. It trades about -0.04 of its total potential returns per unit of risk. iShares Utilities ETF is currently generating about 0.08 per unit of volatility. If you would invest  9,577  in iShares Utilities ETF on December 28, 2024 and sell it today you would earn a total of  450.00  from holding iShares Utilities ETF or generate 4.7% return on investment over 90 days.

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

Global X Renewable  vs.  iShares Utilities ETF

Global X Renewable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Renewable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Utilities ETF

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Utilities ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, IShares Utilities is not utilizing all of its potentials. The new stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Global X and IShares Utilities

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

The idea behind Global X Renewable and iShares Utilities ETF 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.