Correlation Between IShares Edge and Global X
Can any of the company-specific risk be diversified away by investing in both IShares Edge 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 Edge 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 Edge MSCI and Global X MSCI, you can compare the effects of market volatilities on IShares Edge 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 Edge with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and Global X.
Diversification Opportunities for IShares Edge and Global X
0.9 | Correlation Coefficient |
Almost no diversification
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 Edge MSCI and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and IShares Edge 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 Edge MSCI 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 MSCI has no effect on the direction of IShares Edge i.e., IShares Edge and Global X go up and down completely randomly.
Pair Corralation between IShares Edge and Global X
Given the investment horizon of 90 days iShares Edge MSCI is expected to generate 0.97 times more return on investment than Global X. However, iShares Edge MSCI is 1.03 times less risky than Global X. It trades about 0.07 of its potential returns per unit of risk. Global X MSCI is currently generating about 0.05 per unit of risk. If you would invest 2,143 in iShares Edge MSCI on August 28, 2024 and sell it today you would earn a total of 633.00 from holding iShares Edge MSCI or generate 29.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Edge MSCI vs. Global X MSCI
Performance |
| Timeline |
| iShares Edge MSCI |
| Global X MSCI |
IShares Edge and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Edge and Global X
The main advantage of trading using opposite IShares Edge and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge 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 Edge vs. Dimensional Targeted Value | IShares Edge vs. Dimensional Small Cap | IShares Edge vs. Dimensional Marketwide Value | IShares Edge vs. Dimensional Core Equity |
| Global X vs. Dimensional Targeted Value | Global X vs. Dimensional Small Cap | Global X vs. Dimensional Marketwide Value | Global X vs. Dimensional Core Equity |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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