Correlation Between MSCI and Japan Exchange
Can any of the company-specific risk be diversified away by investing in both MSCI and Japan Exchange 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 Japan Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSCI Inc and Japan Exchange Group, you can compare the effects of market volatilities on MSCI and Japan Exchange 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 Japan Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI and Japan Exchange.
Diversification Opportunities for MSCI and Japan Exchange
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MSCI and Japan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and Japan Exchange Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Exchange Group 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 Japan Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Exchange Group has no effect on the direction of MSCI i.e., MSCI and Japan Exchange go up and down completely randomly.
Pair Corralation between MSCI and Japan Exchange
Given the investment horizon of 90 days MSCI is expected to generate 1.63 times less return on investment than Japan Exchange. In addition to that, MSCI is 1.07 times more volatile than Japan Exchange Group. It trades about 0.05 of its total potential returns per unit of risk. Japan Exchange Group is currently generating about 0.08 per unit of volatility. If you would invest 680.00 in Japan Exchange Group on September 13, 2024 and sell it today you would earn a total of 571.00 from holding Japan Exchange Group or generate 83.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSCI Inc vs. Japan Exchange Group
Performance |
| Timeline |
| MSCI Inc |
| Japan Exchange Group |
MSCI and Japan Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSCI and Japan Exchange
The main advantage of trading using opposite MSCI and Japan Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSCI position performs unexpectedly, Japan Exchange 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 Japan Exchange will offset losses from the drop in Japan Exchange's long position.The idea behind MSCI Inc and Japan Exchange Group 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.| Japan Exchange vs. Moodys | Japan Exchange vs. MSCI Inc | Japan Exchange vs. Intercontinental Exchange | Japan Exchange vs. CME Group |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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