Correlation Between Nasdaq and MSCI
Can any of the company-specific risk be diversified away by investing in both Nasdaq and 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 Nasdaq and MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and MSCI Inc, you can compare the effects of market volatilities on Nasdaq and 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 Nasdaq with a short position of MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and MSCI.
Diversification Opportunities for Nasdaq and MSCI
Very good diversification
The 3 months correlation between Nasdaq and MSCI is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc and Nasdaq 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 Nasdaq Inc are associated (or correlated) with MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI Inc has no effect on the direction of Nasdaq i.e., Nasdaq and MSCI go up and down completely randomly.
Pair Corralation between Nasdaq and MSCI
Given the investment horizon of 90 days Nasdaq is expected to generate 2.11 times less return on investment than MSCI. But when comparing it to its historical volatility, Nasdaq Inc is 1.28 times less risky than MSCI. It trades about 0.02 of its potential returns per unit of risk. MSCI Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 41,403 in MSCI Inc on January 19, 2024 and sell it today you would earn a total of 9,173 from holding MSCI Inc or generate 22.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.75% |
| Values | Daily Returns |
Nasdaq Inc vs. MSCI Inc
Performance |
| Timeline |
| Nasdaq Inc |
| MSCI Inc |
Nasdaq and MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and MSCI
The main advantage of trading using opposite Nasdaq and MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, 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 MSCI will offset losses from the drop in MSCI's long position.The idea behind Nasdaq Inc and MSCI 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.| MSCI vs. Dun Bradstreet Holdings | MSCI vs. Intercontinental Exchange | MSCI vs. Nasdaq Inc | MSCI 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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