Correlation Between SPDR MSCI and HSBC MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI 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 SPDR MSCI and HSBC MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI World and HSBC MSCI Taiwan, you can compare the effects of market volatilities on SPDR MSCI 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 SPDR MSCI with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and HSBC MSCI.
Diversification Opportunities for SPDR MSCI and HSBC MSCI
Poor diversification
The 3 months correlation between SPDR and HSBC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI World and HSBC MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI Taiwan and SPDR 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 SPDR MSCI World 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 Taiwan has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and HSBC MSCI go up and down completely randomly.
Pair Corralation between SPDR MSCI and HSBC MSCI
Assuming the 90 days trading horizon SPDR MSCI World is expected to generate 0.99 times more return on investment than HSBC MSCI. However, SPDR MSCI World is 1.01 times less risky than HSBC MSCI. It trades about 0.1 of its potential returns per unit of risk. HSBC MSCI Taiwan is currently generating about 0.06 per unit of risk. If you would invest 9,727 in SPDR MSCI World on September 3, 2024 and sell it today you would earn a total of 8,001 from holding SPDR MSCI World or generate 82.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI World vs. HSBC MSCI Taiwan
Performance |
| Timeline |
| SPDR MSCI World |
| HSBC MSCI Taiwan |
SPDR MSCI and HSBC MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and HSBC MSCI
The main advantage of trading using opposite SPDR MSCI and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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.| SPDR MSCI vs. SPDR MSCI Europe | SPDR MSCI vs. SPDR SP Utilities | SPDR MSCI vs. SPDR MSCI Europe | SPDR MSCI vs. SPDR MSCI EM |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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