Correlation Between Global X and IShares SP

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

By analyzing existing cross correlation between Global X Enhanced and iShares SP Mid Cap, you can compare the effects of market volatilities on Global X and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares SP.

Diversification Opportunities for Global X and IShares SP

-0.36

Correlation Coefficient

Global X  IShares SP

Very good diversification

The 3 months correlation between Global and IShares is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Global X Enhanced and iShares SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Mid 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 Enhanced are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Mid has no effect on the direction of Global X i.e., Global X and IShares SP go up and down completely randomly.

Pair Corralation between Global X and IShares SP

Assuming the 90 days trading horizon Global X Enhanced is expected to under-perform the IShares SP. In addition to that, Global X is 1.99 times more volatile than iShares SP Mid Cap. It trades about -0.03 of its total potential returns per unit of risk. iShares SP Mid Cap is currently generating about 0.22 per unit of volatility. If you would invest  3,164  in iShares SP Mid Cap on September 13, 2024 and sell it today you would earn a total of  447.00  from holding iShares SP Mid Cap or generate 14.13% return on investment over 90 days.

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

Global X Enhanced  vs.  iShares SP Mid Cap

Global X Enhanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

iShares SP Mid

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Mid Cap are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, IShares SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and IShares SP

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

The idea behind Global X Enhanced and iShares SP Mid Cap 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.