Correlation Between IShares NASDAQ and Global X

Can any of the company-specific risk be diversified away by investing in both IShares NASDAQ 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 NASDAQ 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 NASDAQ 100 and Global X SP, you can compare the effects of market volatilities on IShares NASDAQ 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 NASDAQ with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Global X.

Diversification Opportunities for IShares NASDAQ and Global X

0.95

Correlation Coefficient

IShares NASDAQ  Global X

Almost no diversification

The 3 months correlation between IShares and Global is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and Global X SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SP 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 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 SP has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and Global X go up and down completely randomly.

Pair Corralation between IShares NASDAQ and Global X

Assuming the 90 days trading horizon IShares NASDAQ is expected to generate 1.27 times less return on investment than Global X. In addition to that, IShares NASDAQ is 1.2 times more volatile than Global X SP. It trades about 0.24 of its total potential returns per unit of risk. Global X SP is currently generating about 0.36 per unit of volatility. If you would invest  8,132  in Global X SP on September 3, 2024 and sell it today you would earn a total of  524.00  from holding Global X SP or generate 6.44% return on investment over 90 days.

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

iShares NASDAQ 100  vs.  Global X SP

iShares NASDAQ 100

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X SP

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X SP are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares NASDAQ and Global X

The main advantage of trading using opposite IShares NASDAQ and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares NASDAQ 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 NASDAQ 100 and Global X SP 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.