Correlation Between HSBC MSCI and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both HSBC MSCI and SPDR 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 HSBC MSCI and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC MSCI Japan and SPDR MSCI World, you can compare the effects of market volatilities on HSBC MSCI and SPDR 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 HSBC MSCI with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC MSCI and SPDR MSCI.
Diversification Opportunities for HSBC MSCI and SPDR MSCI
Poor diversification
The 3 months correlation between HSBC and SPDR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI Japan and SPDR MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI World and HSBC 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 HSBC MSCI Japan are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI World has no effect on the direction of HSBC MSCI i.e., HSBC MSCI and SPDR MSCI go up and down completely randomly.
Pair Corralation between HSBC MSCI and SPDR MSCI
Assuming the 90 days trading horizon HSBC MSCI is expected to generate 2.44 times less return on investment than SPDR MSCI. But when comparing it to its historical volatility, HSBC MSCI Japan is 1.23 times less risky than SPDR MSCI. It trades about 0.06 of its potential returns per unit of risk. SPDR MSCI World is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 8,241 in SPDR MSCI World on September 12, 2024 and sell it today you would earn a total of 8,981 from holding SPDR MSCI World or generate 108.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
HSBC MSCI Japan vs. SPDR MSCI World
Performance |
| Timeline |
| HSBC MSCI Japan |
| SPDR MSCI World |
HSBC MSCI and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC MSCI and SPDR MSCI
The main advantage of trading using opposite HSBC MSCI and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC MSCI position performs unexpectedly, SPDR 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 SPDR MSCI will offset losses from the drop in SPDR MSCI's long position.| HSBC MSCI vs. Lyxor UCITS Japan | HSBC MSCI vs. Lyxor UCITS Japan | HSBC MSCI vs. Lyxor UCITS Stoxx | HSBC MSCI vs. Amundi CAC 40 |
| SPDR MSCI vs. SPDR Dow Jones | SPDR MSCI vs. iShares Core MSCI | SPDR MSCI vs. iShares SP 500 | SPDR MSCI vs. Vanguard FTSE All World |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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