Correlation Between Global X and IShares SP

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

By analyzing existing cross correlation between Global X Russell and iShares SP 500, you can compare the effects of market volatilities on Global X and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares SP.

Diversification Opportunities for Global X and IShares SP

0.86

Correlation Coefficient

Global X  IShares SP

Very poor diversification

The 3 months correlation between Global and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Global X Russell and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 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 Russell are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Global X i.e., Global X and IShares SP go up and down completely randomly.

Pair Corralation between Global X and IShares SP

Given the investment horizon of 90 days Global X Russell is expected to under-perform the IShares SP. In addition to that, Global X is 1.07 times more volatile than iShares SP 500. It trades about -0.08 of its total potential returns per unit of risk. iShares SP 500 is currently generating about -0.07 per unit of volatility. If you would invest  4,818  in iShares SP 500 on December 29, 2024 and sell it today you would lose (184.00) from holding iShares SP 500 or give up 3.82% of portfolio value over 90 days.

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

Global X Russell  vs.  iShares SP 500

Global X Russell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Russell has generated negative risk-adjusted returns adding no value to investors with long positions. 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 SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Global X and IShares SP

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

The idea behind Global X Russell and iShares SP 500 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.