Correlation Between IShares MSCI and Global X

Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI South and Global X DAX, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Global X.

Diversification Opportunities for IShares MSCI and Global X

0.64

Correlation Coefficient

IShares MSCI  Global X

Poor diversification

The 3 months correlation between IShares and Global is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI South and Global X DAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X DAX and IShares MSCI 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 MSCI South 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 DAX has no effect on the direction of IShares MSCI i.e., IShares MSCI and Global X go up and down completely randomly.

Pair Corralation between IShares MSCI and Global X

Considering the 90-day investment horizon IShares MSCI is expected to generate 2.26 times less return on investment than Global X. In addition to that, IShares MSCI is 1.16 times more volatile than Global X DAX. It trades about 0.08 of its total potential returns per unit of risk. Global X DAX is currently generating about 0.21 per unit of volatility. If you would invest  3,345  in Global X DAX on December 28, 2024 and sell it today you would earn a total of  598.00  from holding Global X DAX or generate 17.88% return on investment over 90 days.

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

iShares MSCI South  vs.  Global X DAX

iShares MSCI South

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI South are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Global X DAX

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X DAX are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Global X showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Global X

The main advantage of trading using opposite IShares MSCI and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI South and Global X DAX 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.