Correlation Between IShares Tech and Global X

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

Diversification Opportunities for IShares Tech and Global X

0.94

Correlation Coefficient

IShares Tech  Global X

Almost no diversification

The 3 months correlation between IShares and Global is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Tech Breakthrough and Global X Artificial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Artificial and IShares Tech 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 Tech Breakthrough 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 Artificial has no effect on the direction of IShares Tech i.e., IShares Tech and Global X go up and down completely randomly.

Pair Corralation between IShares Tech and Global X

Given the investment horizon of 90 days IShares Tech is expected to generate 1.06 times less return on investment than Global X. But when comparing it to its historical volatility, iShares Tech Breakthrough is 1.12 times less risky than Global X. It trades about 0.22 of its potential returns per unit of risk. Global X Artificial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,427  in Global X Artificial on September 5, 2024 and sell it today you would earn a total of  488.00  from holding Global X Artificial or generate 14.24% return on investment over 90 days.

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

iShares Tech Breakthrough  vs.  Global X Artificial

iShares Tech Breakthrough

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Tech Breakthrough are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, IShares Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Global X Artificial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Artificial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward indicators, Global X reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Tech and Global X

The main advantage of trading using opposite IShares Tech and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Tech 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 Tech Breakthrough and Global X Artificial 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.