Correlation Between IShares CoreSP and Global X

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

Diversification Opportunities for IShares CoreSP and Global X

0.87

Correlation Coefficient

IShares CoreSP  Global X

Very poor diversification

The 3 months correlation between IShares and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares CoreSP MidCap and Global X Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Nasdaq and IShares CoreSP 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 CoreSP MidCap 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 Nasdaq has no effect on the direction of IShares CoreSP i.e., IShares CoreSP and Global X go up and down completely randomly.

Pair Corralation between IShares CoreSP and Global X

Assuming the 90 days trading horizon iShares CoreSP MidCap is expected to under-perform the Global X. In addition to that, IShares CoreSP is 1.06 times more volatile than Global X Nasdaq. It trades about -0.25 of its total potential returns per unit of risk. Global X Nasdaq is currently generating about 0.47 per unit of volatility. If you would invest  1,195  in Global X Nasdaq on September 28, 2024 and sell it today you would earn a total of  88.00  from holding Global X Nasdaq or generate 7.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

iShares CoreSP MidCap  vs.  Global X Nasdaq

iShares CoreSP MidCap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares CoreSP MidCap are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, IShares CoreSP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X Nasdaq

Risk-Adjusted Performance

30 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Nasdaq are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Global X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares CoreSP and Global X

The main advantage of trading using opposite IShares CoreSP and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares CoreSP 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 CoreSP MidCap and Global X Nasdaq 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.