Correlation Between Xtrackers MSCI and SPDR MSCI

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

By analyzing existing cross correlation between Xtrackers MSCI Kokusai and SPDR MSCI ACWI, you can compare the effects of market volatilities on Xtrackers MSCI and SPDR 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 Xtrackers MSCI with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and SPDR MSCI.

Diversification Opportunities for Xtrackers MSCI and SPDR MSCI

0.89

Correlation Coefficient

Xtrackers MSCI  SPDR MSCI

Very poor diversification

The 3 months correlation between Xtrackers and SPDR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Kokusai and SPDR MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI ACWI and Xtrackers 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 Xtrackers MSCI Kokusai are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI ACWI has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and SPDR MSCI go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and SPDR MSCI

Given the investment horizon of 90 days Xtrackers MSCI Kokusai is expected to generate 0.95 times more return on investment than SPDR MSCI. However, Xtrackers MSCI Kokusai is 1.05 times less risky than SPDR MSCI. It trades about 0.1 of its potential returns per unit of risk. SPDR MSCI ACWI is currently generating about 0.08 per unit of risk. If you would invest  7,099  in Xtrackers MSCI Kokusai on October 11, 2024 and sell it today you would earn a total of  3,030  from holding Xtrackers MSCI Kokusai or generate 42.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Xtrackers MSCI Kokusai  vs.  SPDR MSCI ACWI

Xtrackers MSCI Kokusai

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Kokusai are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Xtrackers MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR MSCI ACWI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xtrackers MSCI and SPDR MSCI

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

The idea behind Xtrackers MSCI Kokusai and SPDR MSCI ACWI 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.