Correlation Between Satrix Indi and Satrix MSCI

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

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

Diversification Opportunities for Satrix Indi and Satrix MSCI

0.27

Correlation Coefficient

Satrix Indi  Satrix MSCI

Modest diversification

The 3 months correlation between Satrix and Satrix is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Satrix Indi ETF and Satrix MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satrix MSCI World and Satrix Indi 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 Indi ETF are associated (or correlated) with Satrix MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satrix MSCI World has no effect on the direction of Satrix Indi i.e., Satrix Indi and Satrix MSCI go up and down completely randomly.

Pair Corralation between Satrix Indi and Satrix MSCI

Assuming the 90 days trading horizon Satrix Indi ETF is expected to generate 0.99 times more return on investment than Satrix MSCI. However, Satrix Indi ETF is 1.01 times less risky than Satrix MSCI. It trades about 0.43 of its potential returns per unit of risk. Satrix MSCI World is currently generating about 0.06 per unit of risk. If you would invest  1,136,500  in Satrix Indi ETF on September 16, 2024 and sell it today you would earn a total of  72,100  from holding Satrix Indi ETF or generate 6.34% return on investment over 90 days.

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

Satrix Indi ETF  vs.  Satrix MSCI World

Satrix Indi ETF

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Satrix Indi ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Satrix Indi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Satrix MSCI World

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Satrix MSCI World are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Satrix MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Satrix Indi and Satrix MSCI

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

The idea behind Satrix Indi ETF and Satrix MSCI World 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.