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 Funds 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

-0.14

Correlation Coefficient

Global X  IShares Semiconductor

Good diversification

The 3 months correlation between Global and IShares is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds 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 Funds 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

Given the investment horizon of 90 days Global X Funds is expected to generate 0.66 times more return on investment than IShares Semiconductor. However, Global X Funds is 1.52 times less risky than IShares Semiconductor. It trades about 0.03 of its potential returns per unit of risk. iShares Semiconductor ETF is currently generating about -0.03 per unit of risk. If you would invest  3,700  in Global X Funds on September 22, 2024 and sell it today you would earn a total of  75.00  from holding Global X Funds or generate 2.03% return on investment over 90 days.

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

Global X Funds  vs.  iShares Semiconductor ETF

Global X Funds

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 fairly strong basic indicators, IShares Semiconductor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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 Funds 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.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.