Correlation Between Global X and IShares Semiconductor

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

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

Diversification Opportunities for Global X and IShares Semiconductor

0.36

Correlation Coefficient

Global X  IShares Semiconductor

Weak 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 Lithium and iShares Semiconductor ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Semiconductor ETF 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 Lithium are associated (or correlated) with IShares Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Semiconductor ETF has no effect on the direction of Global X i.e., Global X and IShares Semiconductor go up and down completely randomly.

Pair Corralation between Global X and IShares Semiconductor

Considering the 90-day investment horizon Global X Lithium is expected to generate 1.26 times more return on investment than IShares Semiconductor. However, Global X is 1.26 times more volatile than iShares Semiconductor ETF. It trades about 0.11 of its potential returns per unit of risk. iShares Semiconductor ETF is currently generating about -0.05 per unit of risk. If you would invest  3,791  in Global X Lithium on August 30, 2024 and sell it today you would earn a total of  674.00  from holding Global X Lithium or generate 17.78% return on investment over 90 days.

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

Global X Lithium  vs.  iShares Semiconductor ETF

Global X Lithium

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Lithium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, Global X unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Semiconductor ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Global X and IShares Semiconductor

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

The idea behind Global X Lithium and iShares Semiconductor ETF 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.