Correlation Between MSCI and SP Global
Can any of the company-specific risk be diversified away by investing in both MSCI and SP Global 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 MSCI and SP Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSCI Inc and SP Global, you can compare the effects of market volatilities on MSCI and SP Global 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 MSCI with a short position of SP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI and SP Global.
Diversification Opportunities for MSCI and SP Global
Very weak diversification
The 3 months correlation between MSCI and SPGI34 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global and 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 MSCI Inc are associated (or correlated) with SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of MSCI i.e., MSCI and SP Global go up and down completely randomly.
Pair Corralation between MSCI and SP Global
Assuming the 90 days trading horizon MSCI is expected to generate 1.15 times less return on investment than SP Global. In addition to that, MSCI is 1.34 times more volatile than SP Global. It trades about 0.05 of its total potential returns per unit of risk. SP Global is currently generating about 0.08 per unit of volatility. If you would invest 5,080 in SP Global on September 2, 2024 and sell it today you would earn a total of 3,620 from holding SP Global or generate 71.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 81.06% |
| Values | Daily Returns |
MSCI Inc vs. SP Global
Performance |
| Timeline |
| MSCI Inc |
| SP Global |
MSCI and SP Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSCI and SP Global
The main advantage of trading using opposite MSCI and SP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSCI position performs unexpectedly, SP Global 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 SP Global will offset losses from the drop in SP Global's long position.| MSCI vs. Livetech da Bahia | MSCI vs. Raytheon Technologies | MSCI vs. Align Technology | MSCI vs. Monster Beverage |
| SP Global vs. Southwest Airlines Co | SP Global vs. The Home Depot | SP Global vs. Global X Funds | SP Global vs. Autohome |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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