Correlation Between IShares MSCI and GLOBAL X

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

By analyzing existing cross correlation between iShares MSCI Min and GLOBAL X HIGH, you can compare the effects of market volatilities on IShares MSCI and GLOBAL X 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 IShares MSCI with a short position of GLOBAL X. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and GLOBAL X.

Diversification Opportunities for IShares MSCI and GLOBAL X

0.88

Correlation Coefficient

IShares MSCI  GLOBAL X

Very poor diversification

The 3 months correlation between IShares and GLOBAL is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Min and GLOBAL X HIGH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBAL X HIGH and IShares 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 iShares MSCI Min are associated (or correlated) with GLOBAL X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLOBAL X HIGH has no effect on the direction of IShares MSCI i.e., IShares MSCI and GLOBAL X go up and down completely randomly.

Pair Corralation between IShares MSCI and GLOBAL X

Assuming the 90 days trading horizon iShares MSCI Min is expected to under-perform the GLOBAL X. In addition to that, IShares MSCI is 27.4 times more volatile than GLOBAL X HIGH. It trades about -0.06 of its total potential returns per unit of risk. GLOBAL X HIGH is currently generating about 0.65 per unit of volatility. If you would invest  4,995  in GLOBAL X HIGH on September 22, 2024 and sell it today you would earn a total of  13.00  from holding GLOBAL X HIGH or generate 0.26% return on investment over 90 days.

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

iShares MSCI Min  vs.  GLOBAL X HIGH

iShares MSCI Min

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Min are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

GLOBAL X HIGH

Risk-Adjusted Performance

59 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in GLOBAL X HIGH are ranked lower than 59 (%) 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.

Pair Trading with IShares MSCI and GLOBAL X

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

The idea behind iShares MSCI Min and GLOBAL X HIGH 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.