Correlation Between Global X and VanEck Indonesia

Can any of the company-specific risk be diversified away by investing in both Global X and VanEck Indonesia 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 VanEck Indonesia 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 VanEck Indonesia Index, you can compare the effects of market volatilities on Global X and VanEck Indonesia 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 VanEck Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and VanEck Indonesia.

Diversification Opportunities for Global X and VanEck Indonesia

-0.07

Correlation Coefficient

Global X  VanEck Indonesia

Good diversification

The 3 months correlation between Global and VanEck is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and VanEck Indonesia Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Indonesia Index 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 VanEck Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Indonesia Index has no effect on the direction of Global X i.e., Global X and VanEck Indonesia go up and down completely randomly.

Pair Corralation between Global X and VanEck Indonesia

Considering the 90-day investment horizon Global X MSCI is expected to generate 0.73 times more return on investment than VanEck Indonesia. However, Global X MSCI is 1.37 times less risky than VanEck Indonesia. It trades about 0.07 of its potential returns per unit of risk. VanEck Indonesia Index is currently generating about -0.14 per unit of risk. If you would invest  2,339  in Global X MSCI on September 13, 2024 and sell it today you would earn a total of  91.00  from holding Global X MSCI or generate 3.89% return on investment over 90 days.

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

Global X MSCI  vs.  VanEck Indonesia Index

Global X MSCI

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Indonesia Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Indonesia Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Global X and VanEck Indonesia

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

The idea behind Global X MSCI and VanEck Indonesia Index 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.