Correlation Between Global X and Technology Select

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

By analyzing existing cross correlation between Global X Funds and Technology Select Sector, you can compare the effects of market volatilities on Global X and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Technology Select.

Diversification Opportunities for Global X and Technology Select

0.43

Correlation Coefficient

Global X  Technology Select

Very weak diversification

The 3 months correlation between Global and Technology is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Funds are associated (or correlated) with Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of Global X i.e., Global X and Technology Select go up and down completely randomly.

Pair Corralation between Global X and Technology Select

Given the investment horizon of 90 days Global X Funds is expected to under-perform the Technology Select. But the etf apears to be less risky and, when comparing its historical volatility, Global X Funds is 1.2 times less risky than Technology Select. The etf trades about -0.12 of its potential returns per unit of risk. The Technology Select Sector is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  23,438  in Technology Select Sector on September 27, 2024 and sell it today you would earn a total of  629.00  from holding Technology Select Sector or generate 2.68% return on investment over 90 days.

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

Global X Funds  vs.  Technology Select Sector

Global X Funds

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 3 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Technology Select Sector

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Select Sector are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Technology Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and Technology Select

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

The idea behind Global X Funds and Technology Select Sector 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.