Correlation Between Euronext and MSCI

Can any of the company-specific risk be diversified away by investing in both Euronext 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 Euronext and MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Euronext NV and MSCI Inc, you can compare the effects of market volatilities on Euronext 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 Euronext with a short position of MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Euronext and MSCI.

Diversification Opportunities for Euronext and MSCI

-0.43

Correlation Coefficient

Euronext  MSCI

Very good diversification

The 3 months correlation between Euronext and MSCI is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Euronext NV and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc and Euronext 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 Euronext NV 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 Euronext i.e., Euronext and MSCI go up and down completely randomly.

Pair Corralation between Euronext and MSCI

Assuming the 90 days horizon Euronext NV is expected to generate 0.27 times more return on investment than MSCI. However, Euronext NV is 3.7 times less risky than MSCI. It trades about -0.15 of its potential returns per unit of risk. MSCI Inc is currently generating about -0.17 per unit of risk. If you would invest  9,317  in Euronext NV on February 2, 2024 and sell it today you would lose (272.00) from holding Euronext NV or give up 2.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Euronext NV  vs.  MSCI Inc

Euronext NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Euronext NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Euronext is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MSCI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSCI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Euronext and MSCI

The main advantage of trading using opposite Euronext and MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euronext 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 Euronext NV 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.