Correlation Between Global X and IShares Edge
Can any of the company-specific risk be diversified away by investing in both Global X and IShares Edge 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 Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X SP and iShares Edge MSCI, you can compare the effects of market volatilities on Global X and IShares Edge 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 Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares Edge.
Diversification Opportunities for Global X and IShares Edge
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Global X SP and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI 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 SP are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of Global X i.e., Global X and IShares Edge go up and down completely randomly.
Pair Corralation between Global X and IShares Edge
Assuming the 90 days trading horizon Global X SP is expected to generate 1.28 times more return on investment than IShares Edge. However, Global X is 1.28 times more volatile than iShares Edge MSCI. It trades about 0.21 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.09 per unit of risk. If you would invest 7,744 in Global X SP on August 25, 2024 and sell it today you would earn a total of 801.00 from holding Global X SP or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X SP vs. iShares Edge MSCI
Performance |
| Timeline |
| Global X SP |
| iShares Edge MSCI |
Global X and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and IShares Edge
The main advantage of trading using opposite Global X and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.| Global X vs. Global X SPTSX | Global X vs. Vanguard FTSE Developed | Global X vs. Global X Active | Global X vs. iShares SPTSX Capped |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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