Correlation Between Global X and Avantis Emerging

Can any of the company-specific risk be diversified away by investing in both Global X and Avantis Emerging 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 Avantis Emerging 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 Avantis Emerging Markets, you can compare the effects of market volatilities on Global X and Avantis Emerging 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 Avantis Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Avantis Emerging.

Diversification Opportunities for Global X and Avantis Emerging

0.6

Correlation Coefficient

Global X  Avantis Emerging

Poor diversification

The 3 months correlation between Global and Avantis is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and Avantis Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Emerging Markets 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 Avantis Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Emerging Markets has no effect on the direction of Global X i.e., Global X and Avantis Emerging go up and down completely randomly.

Pair Corralation between Global X and Avantis Emerging

Given the investment horizon of 90 days Global X MSCI is expected to under-perform the Avantis Emerging. But the etf apears to be less risky and, when comparing its historical volatility, Global X MSCI is 1.29 times less risky than Avantis Emerging. The etf trades about -0.09 of its potential returns per unit of risk. The Avantis Emerging Markets is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,910  in Avantis Emerging Markets on September 16, 2024 and sell it today you would earn a total of  22.00  from holding Avantis Emerging Markets or generate 0.45% return on investment over 90 days.

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

Global X MSCI  vs.  Avantis Emerging Markets

Global X MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Global X is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Avantis Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Global X and Avantis Emerging

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

The idea behind Global X MSCI and Avantis Emerging Markets 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.