Correlation Between Technology Select and Global X

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

By analyzing existing cross correlation between Technology Select Sector and Global X Cybersecurity, you can compare the effects of market volatilities on Technology Select 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 Technology Select with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and Global X.

Diversification Opportunities for Technology Select and Global X

0.78

Correlation Coefficient

Technology Select  Global X

Poor diversification

The 3 months correlation between Technology and Global is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and Global X Cybersecurity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Cybersecurity and Technology Select 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 Technology Select Sector 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 Cybersecurity has no effect on the direction of Technology Select i.e., Technology Select and Global X go up and down completely randomly.

Pair Corralation between Technology Select and Global X

Considering the 90-day investment horizon Technology Select Sector is expected to generate 1.06 times more return on investment than Global X. However, Technology Select is 1.06 times more volatile than Global X Cybersecurity. It trades about 0.14 of its potential returns per unit of risk. Global X Cybersecurity is currently generating about 0.14 per unit of risk. If you would invest  20,983  in Technology Select Sector on September 1, 2024 and sell it today you would earn a total of  2,390  from holding Technology Select Sector or generate 11.39% return on investment over 90 days.

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

Technology Select Sector  vs.  Global X Cybersecurity

Technology Select Sector

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Select Sector are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal essential indicators, Technology Select may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Global X Cybersecurity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Cybersecurity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Technology Select and Global X

The main advantage of trading using opposite Technology Select and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select 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 Technology Select Sector and Global X Cybersecurity 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..