Correlation Between IShares NASDAQ and Global Dividend

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

By analyzing existing cross correlation between iShares NASDAQ 100 and Global Dividend Growth, you can compare the effects of market volatilities on IShares NASDAQ and Global Dividend 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 NASDAQ with a short position of Global Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Global Dividend.

Diversification Opportunities for IShares NASDAQ and Global Dividend

0.74

Correlation Coefficient

IShares NASDAQ  Global Dividend

Poor diversification

The 3 months correlation between IShares and Global is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and Global Dividend Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Dividend Growth and IShares NASDAQ 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 NASDAQ 100 are associated (or correlated) with Global Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Dividend Growth has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and Global Dividend go up and down completely randomly.

Pair Corralation between IShares NASDAQ and Global Dividend

Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to under-perform the Global Dividend. But the etf apears to be less risky and, when comparing its historical volatility, iShares NASDAQ 100 is 1.18 times less risky than Global Dividend. The etf trades about -0.1 of its potential returns per unit of risk. The Global Dividend Growth is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,083  in Global Dividend Growth on December 30, 2024 and sell it today you would lose (82.00) from holding Global Dividend Growth or give up 7.57% of portfolio value over 90 days.

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

iShares NASDAQ 100  vs.  Global Dividend Growth

iShares NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Global Dividend Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Dividend Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IShares NASDAQ and Global Dividend

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

The idea behind iShares NASDAQ 100 and Global Dividend Growth 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.