Correlation Between Global X and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both Global X and IShares MSCI 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 MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Alternative and iShares MSCI Emerging, you can compare the effects of market volatilities on Global X and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares MSCI.

Diversification Opportunities for Global X and IShares MSCI

-0.37

Correlation Coefficient

Global X  IShares MSCI

Very good diversification

The 3 months correlation between Global and IShares is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Global X Alternative and iShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Emerging 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 Alternative are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Emerging has no effect on the direction of Global X i.e., Global X and IShares MSCI go up and down completely randomly.

Pair Corralation between Global X and IShares MSCI

Given the investment horizon of 90 days Global X is expected to generate 6.74 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Global X Alternative is 1.57 times less risky than IShares MSCI. It trades about 0.05 of its potential returns per unit of risk. iShares MSCI Emerging is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,728  in iShares MSCI Emerging on September 15, 2024 and sell it today you would earn a total of  135.00  from holding iShares MSCI Emerging or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Global X Alternative  vs.  iShares MSCI Emerging

Global X Alternative

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Alternative are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Global X and IShares MSCI

The main advantage of trading using opposite Global X and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.

The idea behind Global X Alternative and iShares MSCI Emerging 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.