Correlation Between IShares NASDAQ and Global X

Can any of the company-specific risk be diversified away by investing in both IShares NASDAQ 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 NASDAQ 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 NASDAQ 100 and Global X NASDAQ 100, you can compare the effects of market volatilities on IShares NASDAQ 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 NASDAQ with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Global X.

Diversification Opportunities for IShares NASDAQ and Global X

0.95

Correlation Coefficient

IShares NASDAQ  Global X

Almost no diversification

The 3 months correlation between IShares and Global is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and Global X NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ and IShares NASDAQ 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 NASDAQ 100 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 NASDAQ has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and Global X go up and down completely randomly.

Pair Corralation between IShares NASDAQ and Global X

Assuming the 90 days trading horizon IShares NASDAQ is expected to generate 1.36 times less return on investment than Global X. But when comparing it to its historical volatility, iShares NASDAQ 100 is 1.03 times less risky than Global X. It trades about 0.22 of its potential returns per unit of risk. Global X NASDAQ 100 is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  7,534  in Global X NASDAQ 100 on September 18, 2024 and sell it today you would earn a total of  1,476  from holding Global X NASDAQ 100 or generate 19.59% return on investment over 90 days.

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

iShares NASDAQ 100  vs.  Global X NASDAQ 100

iShares NASDAQ 100

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares NASDAQ displayed solid returns over the last few months and may actually be approaching a breakup point.

Global X NASDAQ

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X NASDAQ 100 are ranked lower than 22 (%) 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 NASDAQ and Global X

The main advantage of trading using opposite IShares NASDAQ and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares NASDAQ 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 NASDAQ 100 and Global X NASDAQ 100 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.