Correlation Between IShares Core and GLOBAL X

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

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

Diversification Opportunities for IShares Core and GLOBAL X

0.83

Correlation Coefficient

IShares Core  GLOBAL X

Very poor diversification

The 3 months correlation between IShares and GLOBAL is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Conservative and GLOBAL X HIGH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBAL X HIGH and IShares Core 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 iShares Core Conservative are associated (or correlated) with GLOBAL X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLOBAL X HIGH has no effect on the direction of IShares Core i.e., IShares Core and GLOBAL X go up and down completely randomly.

Pair Corralation between IShares Core and GLOBAL X

Assuming the 90 days trading horizon iShares Core Conservative is expected to generate 22.66 times more return on investment than GLOBAL X. However, IShares Core is 22.66 times more volatile than GLOBAL X HIGH. It trades about 0.11 of its potential returns per unit of risk. GLOBAL X HIGH is currently generating about 0.65 per unit of risk. If you would invest  2,335  in iShares Core Conservative on September 22, 2024 and sell it today you would earn a total of  23.00  from holding iShares Core Conservative or generate 0.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

iShares Core Conservative  vs.  GLOBAL X HIGH

iShares Core Conservative

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Conservative are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

GLOBAL X HIGH

Risk-Adjusted Performance

59 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in GLOBAL X HIGH are ranked lower than 59 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, GLOBAL X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and GLOBAL X

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

The idea behind iShares Core Conservative and GLOBAL X HIGH 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.