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 EAFE, 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

0.58

Correlation Coefficient

Global X  Xtrackers MSCI

Very weak diversification

The 3 months correlation between Global and Xtrackers is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and Xtrackers MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI EAFE 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 EAFE 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 MSCI is expected to generate 1.89 times more return on investment than Xtrackers MSCI. However, Global X is 1.89 times more volatile than Xtrackers MSCI EAFE. It trades about 0.05 of its potential returns per unit of risk. Xtrackers MSCI EAFE is currently generating about -0.11 per unit of risk. If you would invest  2,399  in Global X MSCI on September 17, 2024 and sell it today you would earn a total of  86.00  from holding Global X MSCI or generate 3.58% return on investment over 90 days.

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

Global X MSCI  vs.  Xtrackers MSCI EAFE

Global X MSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Global X is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Xtrackers MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 EAFE 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.