Correlation Between MSCI and Hong Kong

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

By analyzing existing cross correlation between MSCI Inc and Hong Kong Exchange, you can compare the effects of market volatilities on MSCI and Hong Kong 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 Hong Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI and Hong Kong.

Diversification Opportunities for MSCI and Hong Kong

0.0

Correlation Coefficient

MSCI  Hong Kong

Pay attention - limited upside

The 3 months correlation between MSCI and Hong is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and Hong Kong Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Exchange 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Exchange has no effect on the direction of MSCI i.e., MSCI and Hong Kong go up and down completely randomly.

Pair Corralation between MSCI and Hong Kong

If you would invest (100.00) in Hong Kong Exchange on January 29, 2024 and sell it today you would earn a total of  100.00  from holding Hong Kong Exchange or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

MSCI Inc  vs.  Hong Kong Exchange

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 latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Hong Kong Exchange

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Hong Kong Exchange has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Hong Kong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MSCI and Hong Kong

The main advantage of trading using opposite MSCI and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSCI position performs unexpectedly, Hong Kong 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 Hong Kong will offset losses from the drop in Hong Kong's long position.

The idea behind MSCI Inc and Hong Kong Exchange 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.