Correlation Between HSBC MSCI and Xtrackers ShortDAX

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

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

Diversification Opportunities for HSBC MSCI and Xtrackers ShortDAX

-0.52

Correlation Coefficient

HSBC MSCI  Xtrackers ShortDAX

Excellent diversification

The 3 months correlation between HSBC and Xtrackers is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI Indonesia and Xtrackers ShortDAX Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ShortDAX Daily and HSBC 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 HSBC MSCI Indonesia are associated (or correlated) with Xtrackers ShortDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers ShortDAX Daily has no effect on the direction of HSBC MSCI i.e., HSBC MSCI and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between HSBC MSCI and Xtrackers ShortDAX

Assuming the 90 days trading horizon HSBC MSCI Indonesia is expected to generate 0.67 times more return on investment than Xtrackers ShortDAX. However, HSBC MSCI Indonesia is 1.49 times less risky than Xtrackers ShortDAX. It trades about 0.04 of its potential returns per unit of risk. Xtrackers ShortDAX Daily is currently generating about -0.05 per unit of risk. If you would invest  6,251  in HSBC MSCI Indonesia on May 2, 2025 and sell it today you would earn a total of  167.00  from holding HSBC MSCI Indonesia or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

HSBC MSCI Indonesia  vs.  Xtrackers ShortDAX Daily

HSBC MSCI Indonesia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC MSCI Indonesia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, HSBC MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Xtrackers ShortDAX Daily

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers ShortDAX Daily has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Xtrackers ShortDAX is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with HSBC MSCI and Xtrackers ShortDAX

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

The idea behind HSBC MSCI Indonesia and Xtrackers ShortDAX Daily 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.