Correlation Between Global X and Xtrackers MSCI

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

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

Diversification Opportunities for Global X and Xtrackers MSCI

0.88

Correlation Coefficient

Global X  Xtrackers MSCI

Very poor diversification

The 3 months correlation between Global and Xtrackers is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and Xtrackers MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers 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 MSCI are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Emerging has no effect on the direction of Global X i.e., Global X and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Global X and Xtrackers MSCI

Given the investment horizon of 90 days Global X is expected to generate 1.39 times less return on investment than Xtrackers MSCI. But when comparing it to its historical volatility, Global X MSCI is 1.3 times less risky than Xtrackers MSCI. It trades about 0.05 of its potential returns per unit of risk. Xtrackers MSCI Emerging is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,413  in Xtrackers MSCI Emerging on December 2, 2024 and sell it today you would earn a total of  357.00  from holding Xtrackers MSCI Emerging or generate 14.79% return on investment over 90 days.

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

Global X MSCI  vs.  Xtrackers MSCI Emerging

Global X MSCI

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Xtrackers MSCI Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Emerging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Global X and Xtrackers MSCI

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

The idea behind Global X MSCI and Xtrackers 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.