Correlation Between MSCI and Singapore Exchange

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

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

Diversification Opportunities for MSCI and Singapore Exchange

0.44

Correlation Coefficient

MSCI  Singapore Exchange

Very weak diversification

The 3 months correlation between MSCI and Singapore is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and Singapore Exchange Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore 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 Singapore Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Exchange has no effect on the direction of MSCI i.e., MSCI and Singapore Exchange go up and down completely randomly.

Pair Corralation between MSCI and Singapore Exchange

Given the investment horizon of 90 days MSCI Inc is expected to under-perform the Singapore Exchange. In addition to that, MSCI is 4.49 times more volatile than Singapore Exchange Ltd. It trades about -0.18 of its total potential returns per unit of risk. Singapore Exchange Ltd is currently generating about 0.09 per unit of volatility. If you would invest  10,150  in Singapore Exchange Ltd on January 30, 2024 and sell it today you would earn a total of  146.00  from holding Singapore Exchange Ltd or generate 1.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

MSCI Inc  vs.  Singapore Exchange Ltd

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 weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Singapore Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Exchange Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Singapore Exchange 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 Singapore Exchange

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

The idea behind MSCI Inc and Singapore Exchange Ltd 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.