Correlation Between Satrix MSCI and Satrix 40

Can any of the company-specific risk be diversified away by investing in both Satrix MSCI and Satrix 40 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 Satrix MSCI and Satrix 40 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Satrix MSCI EM and Satrix 40 ETF, you can compare the effects of market volatilities on Satrix MSCI and Satrix 40 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 Satrix MSCI with a short position of Satrix 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Satrix MSCI and Satrix 40.

Diversification Opportunities for Satrix MSCI and Satrix 40

0.65

Correlation Coefficient

Satrix MSCI  Satrix 40

Poor diversification

The 3 months correlation between Satrix and Satrix is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Satrix MSCI EM and Satrix 40 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satrix 40 ETF and Satrix 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 Satrix MSCI EM are associated (or correlated) with Satrix 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satrix 40 ETF has no effect on the direction of Satrix MSCI i.e., Satrix MSCI and Satrix 40 go up and down completely randomly.

Pair Corralation between Satrix MSCI and Satrix 40

Assuming the 90 days trading horizon Satrix MSCI EM is expected to generate 1.24 times more return on investment than Satrix 40. However, Satrix MSCI is 1.24 times more volatile than Satrix 40 ETF. It trades about -0.01 of its potential returns per unit of risk. Satrix 40 ETF is currently generating about -0.06 per unit of risk. If you would invest  522,600  in Satrix MSCI EM on September 24, 2024 and sell it today you would lose (1,000.00) from holding Satrix MSCI EM or give up 0.19% of portfolio value over 90 days.

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

Satrix MSCI EM  vs.  Satrix 40 ETF

Satrix MSCI EM

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Satrix MSCI EM are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Satrix MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Satrix 40 ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Satrix 40 ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Satrix 40 is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Satrix MSCI and Satrix 40

The main advantage of trading using opposite Satrix MSCI and Satrix 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Satrix MSCI position performs unexpectedly, Satrix 40 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 Satrix 40 will offset losses from the drop in Satrix 40's long position.

The idea behind Satrix MSCI EM and Satrix 40 ETF 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.