Correlation Between Vanguard FTSE and HSBC MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 Vanguard FTSE and HSBC MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and HSBC MSCI Japan, you can compare the effects of market volatilities on Vanguard FTSE 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 Vanguard FTSE with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and HSBC MSCI.
Diversification Opportunities for Vanguard FTSE and HSBC MSCI
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and HSBC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed 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 Vanguard FTSE 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 Vanguard FTSE Developed 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 Vanguard FTSE i.e., Vanguard FTSE and HSBC MSCI go up and down completely randomly.
Pair Corralation between Vanguard FTSE and HSBC MSCI
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.41 times less return on investment than HSBC MSCI. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.25 times less risky than HSBC MSCI. It trades about 0.06 of its potential returns per unit of risk. HSBC MSCI Japan is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,320 in HSBC MSCI Japan on September 4, 2024 and sell it today you would earn a total of 577.00 from holding HSBC MSCI Japan or generate 17.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. HSBC MSCI Japan
Performance |
| Timeline |
| Vanguard FTSE Developed |
| HSBC MSCI Japan |
Vanguard FTSE and HSBC MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and HSBC MSCI
The main advantage of trading using opposite Vanguard FTSE and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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.| Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard FTSE Developed |
| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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