Correlation Between IShares Biotechnology and Global X
Can any of the company-specific risk be diversified away by investing in both IShares Biotechnology 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 Biotechnology 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 Biotechnology ETF and Global X Aging, you can compare the effects of market volatilities on IShares Biotechnology 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 Biotechnology with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Biotechnology and Global X.
Diversification Opportunities for IShares Biotechnology and Global X
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Global is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares Biotechnology ETF and Global X Aging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Aging and IShares Biotechnology 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 Biotechnology ETF 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 Aging has no effect on the direction of IShares Biotechnology i.e., IShares Biotechnology and Global X go up and down completely randomly.
Pair Corralation between IShares Biotechnology and Global X
Considering the 90-day investment horizon IShares Biotechnology is expected to generate 1.45 times less return on investment than Global X. In addition to that, IShares Biotechnology is 1.54 times more volatile than Global X Aging. It trades about 0.04 of its total potential returns per unit of risk. Global X Aging is currently generating about 0.1 per unit of volatility. If you would invest 3,055 in Global X Aging on November 18, 2024 and sell it today you would earn a total of 132.00 from holding Global X Aging or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Biotechnology ETF vs. Global X Aging
Performance |
| Timeline |
| iShares Biotechnology ETF |
| Global X Aging |
IShares Biotechnology and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Biotechnology and Global X
The main advantage of trading using opposite IShares Biotechnology and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Biotechnology 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.| IShares Biotechnology vs. First Trust Exchange Traded | IShares Biotechnology vs. Horizon Kinetics Medical | IShares Biotechnology vs. Harbor Health Care | IShares Biotechnology vs. Fidelity MSCI Health |
| Global X vs. Global X Clean | Global X vs. Global X Renewable | Global X vs. Global X Thematic | Global X vs. Global X AgTech |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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