Correlation Between Global X and IShares 1

Can any of the company-specific risk be diversified away by investing in both Global X and IShares 1 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 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Short Term and iShares 1 3 Year, you can compare the effects of market volatilities on Global X and IShares 1 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 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares 1.

Diversification Opportunities for Global X and IShares 1

0.66

Correlation Coefficient

Global X  IShares 1

Poor diversification

The 3 months correlation between Global and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Global X Short Term and iShares 1 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 3 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 Short Term are associated (or correlated) with IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 3 has no effect on the direction of Global X i.e., Global X and IShares 1 go up and down completely randomly.

Pair Corralation between Global X and IShares 1

Given the investment horizon of 90 days Global X is expected to generate 1.34 times less return on investment than IShares 1. But when comparing it to its historical volatility, Global X Short Term is 1.39 times less risky than IShares 1. It trades about 0.32 of its potential returns per unit of risk. iShares 1 3 Year is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  8,126  in iShares 1 3 Year on December 20, 2024 and sell it today you would earn a total of  125.00  from holding iShares 1 3 Year or generate 1.54% return on investment over 90 days.

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

Global X Short Term  vs.  iShares 1 3 Year

Global X Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Short Term are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Global X is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

iShares 1 3

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 3 Year are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, IShares 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and IShares 1

The main advantage of trading using opposite Global X and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.

The idea behind Global X Short Term and iShares 1 3 Year 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.