Correlation Between VanEck Defense and HSBC MSCI

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

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

Diversification Opportunities for VanEck Defense and HSBC MSCI

-0.69

Correlation Coefficient

VanEck Defense  HSBC MSCI

Excellent diversification

The 3 months correlation between VanEck and HSBC is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Defense ETF and HSBC MSCI Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI Indonesia and VanEck Defense 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 VanEck Defense ETF are associated (or correlated) with HSBC MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI Indonesia has no effect on the direction of VanEck Defense i.e., VanEck Defense and HSBC MSCI go up and down completely randomly.

Pair Corralation between VanEck Defense and HSBC MSCI

Assuming the 90 days trading horizon VanEck Defense ETF is expected to generate 0.71 times more return on investment than HSBC MSCI. However, VanEck Defense ETF is 1.41 times less risky than HSBC MSCI. It trades about -0.19 of its potential returns per unit of risk. HSBC MSCI Indonesia is currently generating about -0.2 per unit of risk. If you would invest  3,608  in VanEck Defense ETF on September 23, 2024 and sell it today you would lose (148.00) from holding VanEck Defense ETF or give up 4.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

VanEck Defense ETF  vs.  HSBC MSCI Indonesia

VanEck Defense ETF

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Defense ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, VanEck Defense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HSBC MSCI Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HSBC MSCI Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with VanEck Defense and HSBC MSCI

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

The idea behind VanEck Defense ETF and HSBC MSCI Indonesia 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.