Correlation Between MSCI and Nasdaq
Can any of the company-specific risk be diversified away by investing in both MSCI and Nasdaq 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 Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSCI Inc and Nasdaq Inc, you can compare the effects of market volatilities on MSCI and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI and Nasdaq.
Diversification Opportunities for MSCI and Nasdaq
Weak diversification
The 3 months correlation between MSCI and Nasdaq is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of MSCI i.e., MSCI and Nasdaq go up and down completely randomly.
Pair Corralation between MSCI and Nasdaq
Given the investment horizon of 90 days MSCI Inc is expected to generate 1.23 times more return on investment than Nasdaq. However, MSCI is 1.23 times more volatile than Nasdaq Inc. It trades about 0.07 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.09 per unit of risk. If you would invest 60,058 in MSCI Inc on October 20, 2024 and sell it today you would earn a total of 1,144 from holding MSCI Inc or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSCI Inc vs. Nasdaq Inc
Performance |
| Timeline |
| MSCI Inc |
| Nasdaq Inc |
MSCI and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSCI and Nasdaq
The main advantage of trading using opposite MSCI and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSCI position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.The idea behind MSCI Inc and Nasdaq Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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