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
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and Xtrackers is 0.95. 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 1.13 times more return on investment than Xtrackers MSCI. However, Global X is 1.13 times more volatile than Xtrackers MSCI EAFE. It trades about -0.11 of its potential returns per unit of risk. Xtrackers MSCI EAFE is currently generating about -0.17 per unit of risk. If you would invest 1,479 in Global X MSCI on August 24, 2024 and sell it today you would lose (39.00) from holding Global X MSCI or give up 2.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X MSCI vs. Xtrackers MSCI EAFE
Performance |
| Timeline |
| Global X MSCI |
| Xtrackers MSCI EAFE |
Global X and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
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.| Global X vs. Dimensional Targeted Value | Global X vs. Dimensional Small Cap | Global X vs. Dimensional Marketwide Value | Global X vs. Dimensional Core Equity |
| Xtrackers MSCI vs. Dimensional Targeted Value | Xtrackers MSCI vs. Dimensional Small Cap | Xtrackers MSCI vs. Dimensional Marketwide Value | Xtrackers MSCI vs. Dimensional Core Equity |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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