Correlation Between IShares Consumer and Global X
Can any of the company-specific risk be diversified away by investing in both IShares Consumer 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 Consumer 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 Consumer Staples and Global X AgTech, you can compare the effects of market volatilities on IShares Consumer 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 Consumer with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and Global X.
Diversification Opportunities for IShares Consumer and Global X
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and Global is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Staples and Global X AgTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X AgTech and IShares Consumer 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 Consumer Staples 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 AgTech has no effect on the direction of IShares Consumer i.e., IShares Consumer and Global X go up and down completely randomly.
Pair Corralation between IShares Consumer and Global X
Considering the 90-day investment horizon iShares Consumer Staples is expected to generate 0.62 times more return on investment than Global X. However, iShares Consumer Staples is 1.61 times less risky than Global X. It trades about 0.06 of its potential returns per unit of risk. Global X AgTech is currently generating about 0.01 per unit of risk. If you would invest 6,214 in iShares Consumer Staples on September 12, 2024 and sell it today you would earn a total of 612.00 from holding iShares Consumer Staples or generate 9.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Consumer Staples vs. Global X AgTech
Performance |
| Timeline |
| iShares Consumer Staples |
| Global X AgTech |
IShares Consumer and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Consumer and Global X
The main advantage of trading using opposite IShares Consumer and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer 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 Consumer Staples and Global X AgTech 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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