Correlation Between IShares II and HSBC MSCI
Can any of the company-specific risk be diversified away by investing in both IShares II and HSBC 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 IShares II and HSBC MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares II Public and HSBC MSCI Japan, you can compare the effects of market volatilities on IShares II and HSBC 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 IShares II with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares II and HSBC MSCI.
Diversification Opportunities for IShares II and HSBC MSCI
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and HSBC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public and HSBC MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI Japan and IShares II 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 II Public are associated (or correlated) with HSBC MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI Japan has no effect on the direction of IShares II i.e., IShares II and HSBC MSCI go up and down completely randomly.
Pair Corralation between IShares II and HSBC MSCI
Assuming the 90 days trading horizon IShares II is expected to generate 1.41 times less return on investment than HSBC MSCI. But when comparing it to its historical volatility, iShares II Public is 2.03 times less risky than HSBC MSCI. It trades about 0.49 of its potential returns per unit of risk. HSBC MSCI Japan is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 3,642 in HSBC MSCI Japan on September 4, 2024 and sell it today you would earn a total of 255.00 from holding HSBC MSCI Japan or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares II Public vs. HSBC MSCI Japan
Performance |
| Timeline |
| iShares II Public |
| HSBC MSCI Japan |
IShares II and HSBC MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares II and HSBC MSCI
The main advantage of trading using opposite IShares II and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares II position performs unexpectedly, HSBC 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 HSBC MSCI will offset losses from the drop in HSBC MSCI's long position.| IShares II vs. Vanguard FTSE Developed | IShares II vs. HSBC MSCI Japan | IShares II vs. iShares II Public | IShares II vs. Hydratec Industries NV |
| HSBC MSCI vs. HSBC MSCI China | HSBC MSCI vs. HSBC Emerging Market | HSBC MSCI vs. HSBC USA Sustainable | HSBC MSCI vs. HSBC MUCPAB ETF |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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