Correlation Between Global X and FFEM
Can any of the company-specific risk be diversified away by investing in both Global X and FFEM 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 FFEM 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 FFEM, you can compare the effects of market volatilities on Global X and FFEM 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 FFEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and FFEM.
Diversification Opportunities for Global X and FFEM
Very weak diversification
The 3 months correlation between Global and FFEM is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and FFEM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FFEM 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 FFEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FFEM has no effect on the direction of Global X i.e., Global X and FFEM go up and down completely randomly.
Pair Corralation between Global X and FFEM
Given the investment horizon of 90 days Global X is expected to generate 3.06 times less return on investment than FFEM. But when comparing it to its historical volatility, Global X MSCI is 1.04 times less risky than FFEM. It trades about 0.04 of its potential returns per unit of risk. FFEM is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,500 in FFEM on September 14, 2024 and sell it today you would earn a total of 40.00 from holding FFEM or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 6.85% |
| Values | Daily Returns |
Global X MSCI vs. FFEM
Performance |
| Timeline |
| Global X MSCI |
| FFEM |
Global X and FFEM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and FFEM
The main advantage of trading using opposite Global X and FFEM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, FFEM 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 FFEM will offset losses from the drop in FFEM's long position.| Global X vs. Global X MSCI | Global X vs. Global X Alternative | Global X vs. First Trust Intl | Global X vs. iShares AsiaPacific Dividend |
| FFEM vs. Global X MSCI | FFEM vs. Global X Alternative | FFEM vs. iShares Emerging Markets | FFEM vs. Global X SuperDividend |
Check out your portfolio center.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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