Correlation Between Technology Select and Global X
Can any of the company-specific risk be diversified away by investing in both Technology Select 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 Technology Select and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Select Sector and Global X Cybersecurity, you can compare the effects of market volatilities on Technology Select 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 Technology Select with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and Global X.
Diversification Opportunities for Technology Select and Global X
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Technology and Global is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and Global X Cybersecurity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Cybersecurity and Technology Select 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 Technology Select Sector 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 Cybersecurity has no effect on the direction of Technology Select i.e., Technology Select and Global X go up and down completely randomly.
Pair Corralation between Technology Select and Global X
Considering the 90-day investment horizon Technology Select is expected to generate 2.27 times less return on investment than Global X. But when comparing it to its historical volatility, Technology Select Sector is 1.04 times less risky than Global X. It trades about 0.08 of its potential returns per unit of risk. Global X Cybersecurity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,044 in Global X Cybersecurity on August 26, 2024 and sell it today you would earn a total of 308.00 from holding Global X Cybersecurity or generate 10.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Select Sector vs. Global X Cybersecurity
Performance |
| Timeline |
| Technology Select Sector |
| Global X Cybersecurity |
Technology Select and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Select and Global X
The main advantage of trading using opposite Technology Select and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select 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.| Technology Select vs. Invesco DWA Utilities | Technology Select vs. Invesco Dynamic Large | Technology Select vs. Invesco Dynamic Large | Technology Select vs. HUMANA INC |
| Global X vs. Invesco DWA Utilities | Global X vs. Invesco Dynamic Large | Global X vs. Invesco Dynamic Large | Global X vs. HUMANA INC |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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