Correlation Between IShares Global and Global X

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

Diversification Opportunities for IShares Global and Global X

-0.9

Correlation Coefficient

IShares Global  Global X

Pay attention - limited upside

The 3 months correlation between IShares and Global is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare and Global X Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Industry and IShares Global 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 Global Healthcare 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 Industry has no effect on the direction of IShares Global i.e., IShares Global and Global X go up and down completely randomly.

Pair Corralation between IShares Global and Global X

Assuming the 90 days trading horizon iShares Global Healthcare is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Healthcare is 2.09 times less risky than Global X. The etf trades about -0.28 of its potential returns per unit of risk. The Global X Industry is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,740  in Global X Industry on September 15, 2024 and sell it today you would earn a total of  1,019  from holding Global X Industry or generate 21.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

iShares Global Healthcare  vs.  Global X Industry

iShares Global Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Global X Industry

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Industry are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Global and Global X

The main advantage of trading using opposite IShares Global and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 Global Healthcare and Global X Industry 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.