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 Emerging 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

0.99

Correlation Coefficient

Global X  IShares MSCI

No risk reduction

The 3 months correlation between Global and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Global X Emerging 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 Emerging 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

Assuming the 90 days trading horizon Global X is expected to generate 1.2 times less return on investment than IShares MSCI. In addition to that, Global X is 1.05 times more volatile than iShares MSCI Emerging. It trades about 0.06 of its total potential returns per unit of risk. iShares MSCI Emerging is currently generating about 0.08 per unit of volatility. If you would invest  3,323  in iShares MSCI Emerging on December 30, 2024 and sell it today you would earn a total of  133.00  from holding iShares MSCI Emerging or generate 4.0% return on investment over 90 days.

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

Global X Emerging  vs.  iShares MSCI Emerging

Global X Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Emerging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares MSCI Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Emerging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 Emerging 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.